Buying homes for sale to use as rental properties is a significant financial decision, and as it is so, it means that you must choose a property that will prove a wise investment.
There are many factors which might influence the property that you choose to buy, with its price tag being one of the most significant features that investors direct their attention to.
However, there are other things that investors should keep an eye out for too.
If you’re looking for property for sale to buy as an investment, then here are three things you may wish to keep at the forefront of your mind.
The level of return that property brings will be one of the most significant factors influencing your decision, as it determines how much profit you make from your investment.
To calculate the gross rental yield, you will need to divide the annual rental income of the property by the purchase price then multiply it by 100.
It’s important to note that while a house may have a high rental yield, there can also be significant costs and expenses that come with the property.
These could be high annual rates, maintenance costs or strata levies. This means that these expenses will also have an influence on your decision to buy a certain property or not.
In order for your rental property to achieve a stream of income, you must have tenants living in it. But how will you get tenants in your property if it’s over-priced and in a ghost town?
Therefore when you are searching for a property, it’s a good idea to look for areas that present a good vacancy rate. Towns or cities where the vacancy rate is under 3 per cent are considered to show a good level of demand from rental accommodation seekers.
For instance, in June this year, the rate for Sydney’s CBD was sitting at 2.1 per cent. This represents a tight rental market.
If the residential rental market is tight then the pressure from demand may have a flow-on effect to rents, pushing them up.
On the other hand, areas with very high vacancies may result in properties sitting emptier for longer.
Another factor which may influence your decision is your ability to obtain finance, and how much you can borrow.
This may place limitations on how much you will spend, and therefore the type of property you will buy and where it is located.
At the same time, there are a myriad of home loan products on the market offering investors different features and interest rates.
As interest rates are currently at a low and attractive level, it may trigger investors to take advantage of them and become active in the market in the next few months.