Investing in real estate can be seen by most people as a means to tie down your capital rather than a fruitful investment to yield dividends. Many people don’t believe that they can get good returns on investment at the same time. So, they only dream of the day the property will be sold for a profit or to liquidate their capital hoping that it will hold up with inflation.
Whether a rental house is built or bought by an investor, it is important to note that passive income it generates will service the mortgage, periodic maintenance, repairs, and/or fulfill other accomplishments for the owner. However, if investing in real estate is for building and selling, the gain is also an income for the investor. In some situations, if not carefully planned the investor might lose profit to hyperinflation. Just imagine that the house was built and sold before a wave of hyperinflation, the developer might underprice his property. This means that the investor will have to use both his capital, profit and on some occasions add more money to be able to develop something similar. If you are involved in the build and sell, always get a market survey of building materials and land prices before the commencement of building and when you are about to sell the property. That will give you the ideal market value for your finished property.
If you don’t want your house to stay in the market for a very long time, choose a good location and build a house with excellent architectural design and interior finishes.
When you buy or build a house for rental purposes, ensure to take it as an investment that needs to yield income. Be involved in tenant selection; make periodic visits to the property to know the state and usage. Some tenants believe they can misuse a property after paying their rent despite reading and signing the tenancy agreement. So you have to keep them under check at all times. Failure to do this can seriously erode your profit.
Also, make sure you review your rental rates every two (2) years by making the necessary adjustment on the rent to leverage the effects of inflation. These allow your earnings to catch up with inflation. Typically, for a month-based rental, notice of increment should be at least a month in advance while yearly tenants should get at least 6-months notice before the expiration of rent. This helps the tenant to plan for the new rates. Be sure to understand the laws around rents increment in your areas and abide by the law stipulations.
It will be in the interest of the landlord to maintain and periodically give the property a facelift. These are by painting the exterior of the house and fence (painting some areas a different color from the original look will give the tenants and prospective tenants an aesthetic appeal). You can plant flowers (landscaping) and change the balcony handrails to a more modern one. This helps your house to keep up with the new design trends in the area and also maintain curb appeal.
In conclusion, if your property does not yield enough income for you, help you with tax benefits, help you with the mortgage payment, or keep up with property maintenance and repairs. Then you don’t have the right tenant that will keep your property in a pristine condition, or the right rent is not being paid for the property.
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