If you are in a position to seek out investments, rental property is very lucrative and is probably at the top of your list. It makes sense to invest in a second property and rent it out to a suitable tenant, which brings you a regular income. Before you go rushing off to look at rental properties, there are some important things you should know.
When you list a property for rental, as the landlord, you are liable to maintain the building and provide the utilities and services the tenant requires. Imagine you live in a rental home and a water pipe burst in the upstairs bathroom; whom are you going to call? The owner, of course, who, in such a situation would be liable, provided there was no negligence on the tenant’s side.
If you had 3-4 rental properties, you would be receiving calls almost daily; tenants complaining about minor issues, which can be very stressful. You can use property selection services from a leading Australian company that helps rental property investors choose the right property.
If you want to be a successful rental property investor, you need the services of an established property management company; they take care of building maintenance, and security and even screen the tenants to ensure suitability. They also have a legal department that you can use when there are issues with tenants; simply put, they tailor their services to suit you. You would typically be billed on a quarterly basis. Click here for investing 101.
Crunching the numbers
You need to find a suitable property; preferably a rundown house that you can renovate, as you can acquire the real estate for a low price if it is in poor condition.
There are fees involved, which include the following:
- Land & property surveys
- Legal fees
- Renovation costs
- Stamp duty
- Property management fees
If you have access to the funds and the rental price is good, you should make a profit at the end of the year; a portion of your profit will go to the property management company, yet this is a necessary cost and not something you should overlook.
If a tenant were to contact state authorities complaining about the property, you would need to take legal advice prior to responding. Conflicts do happen and sometimes tenants can be unreasonable, which can really test your patience. This is yet another reason to hook up with a property management company, who have a resident lawyer on call 24/7.
Location, location, and location
We have to say it; the rental will entirely depend on location; a housing zone that is in a city suburb, with schools, shops, and parks nearby, would be a high-rent area. You can compare rents in different areas and hopefully find the right property that appreciates well over the years.
Note: There are taxation considerations with the rental property business, which you should look into.