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Advice
and Tips for Your Rental Property
Buying Questions - FAQ Guide PART 1
Investing
in a new rental property is an important decision and it's only natural
to have rental property buying questions. Uncover the answers to your
common and important rental property buying questions with our rental
property buying guide here.
Should
I Park My Money in Rental Properties or Other Investments?
Buying
rental property tends to
be more hands-on which can
be a good or bad thing depending on what type of investor you are.
Being a landlord often involves having to manage your tenants
and
rental property. On the bright side, it's usually worth the extra
effort because it is those tenants who will be paying for your monthly
mortgage payments.
If you enjoy hanging out with other people and working on home
improvement projects, then you may even enjoy being a rental
property owner. Otherwise our rental property buying advice for you is
to leave the running of your rental
property to a trusted property manager or turn to paper assets
like shares and bonds.
Is
it Risky to Invest My Money in Rental Properties?
Just like most types of investments, there is always a certain risk
involved when it comes to rental property investing. The good news is
that rental properties are generally considered more safe than other
popular investments such as shares, derivatives or currency.
The reason
for this lower risk is due to slow moving and less volatile
real estate market. On top of that, property investing often comes with
generous tax breaks which helps to minimise any potential losses. Click here for more
benefits of rental property investing in our rental property buying
questions.
How
do I Compare the Returns of Different Rental Properties?
Rental
yield is widely used by rental property investors to compare
the value and returns across different rental properties. It's
basically the ratio of annual rent of a rental property versus its
total property cost. Naturally a higher rental yield will be better
because you can recover your investment capital sooner.
If you want a more accurate estimate, it's important to
calculate net
rental yield instead of the more popular (and simplistic) gross rental
yield. Click for
more details on calculating your rental yield in our guide to rental
property invesment analysis.
How
Can I Tell if a Rental Property will be Profitable?
This
has to be one of the most important and commonly asked rental property
buying questions. While every rental property investor has his own
methods and rental property buying tips for judging the profitability
of a rental
property, calculating the property's net cash flow still remains one of
the most reliable and time tested ways to tell if it will be profitable.
When
choosing your rental property, it's highly recommended to go for one
that generates a positive cash flow. This means finding a rental
property where the rent from tenants is more than your total rental
expenses which includes the mortgage payments, property repairs and
other bills.
How
Much Rent Can I Ask for this Rental Property?
If
you are wondering how much rent a rental property can fetch, you can
arrive at a rough estimate by looking at its home value. As a general
rule of thumb, the monthly rent should be equal to 0.8% to 1.1% of your
home value.
Another more tedious but reliable method to estimate
the rent is to compare it with the recent rent prices charged by
similar rental properties in the same neighbourhood. To find out the
asking rent of comparable rental properties, Click here for our
landlord tenant guide
on how much rent to charge.
Are you ready
for even more riveting rental property buying questions such as, "The
real estate prices in my area are skyrocketing! Should I buy now?":
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