Posted by John Doe
A good investment property can take you far. You may buy a home or apartment in the hopes of renovating it and selling it at a gain, or you may want to buy a rental property. Rentals can be a good way to cover your own costs, including your mortgage, and even make a profit. Holiday rentals, for instance, can be rented out for short periods and can be a great way to earn some extra income. However, when it comes to purchasing an investment property and applying for an investment property mortgage, there are lots of considerations and pitfalls to avoid.
While the right investment property can yield a great return, there are also those who fall into the trap of buying an empty investment property. If your investment property sits empty, it won’t cover any costs and you may even be taxed more on it. You will still have to make your mortgage payments on time, regardless of whether the property is occupied or not.
There are many reasons you may find your rental property, or holiday rental, empty. Lengthy empty periods should be avoided, not only for financial reasons, but because an empty property is more susceptible to break-ins and property damage. Below are some tips to help you avoid empty investment properties.
Do Your Research
Before applying for an investment property mortgage, it’s important that you’ve researched every aspect of the process. This includes:
- What you will need to include on your mortgage application: When applying for an investment property mortgage, you will need to ensure you can fill in every part of the application thoroughly and accurately. You may want to check your credit score before applying, and work on building good credit history leading up to your application. A mortgage professional can assist you with these steps, especially if you are an inexperienced buyer.
- Use a Mortgage Calculator: Be realistic with your investment expectations. A mortgage calculator, which can be found online, can help you figure out exactly what your monthly payments will be.
- Do the Math: By calculating your monthly mortgage, as well as any property taxes, maintenance costs, and other expenses, as well as researching market rent around the neighbourhood, you can calculate the appropriate rent to charge.
- The Neighbourhood: A great place to invest is in an up-and-coming neighbourhood. A neighbourhood that attracts young people, young families, and students, is sure to become more desirable over time, and your investment will grow.
- The Neighbours: If you are unfamiliar with the neighbourhood you are investing in, you can glean a lot of information by speaking to people who live in the neighbourhood, as well as local business owners. This can give you valuable insight into what kinds of people live in the neighbourhood, how safe it is, and any potential problems.
Shop Around For A Good Investment Mortgage
A mortgage broker or mortgage professional cannot only help you through the mortgage application process but can also help you find the best possible mortgage rate. In addition to hiring a mortgage professional, you can also conduct your own research.
Remember that mortgage rates can change over the years along with the housing market. Make sure you are prepared should rates go up, or the market go down. Check if remortgaging is an option.
Invest In Good Tenants
Bad tenants can lead to a lot of grief and trouble. It’s important to carefully background and credit check any tenants, but beyond that it is also important to value good, long-term tenants. By finding someone who plans to rent your property long-term, will pay rent on time, and will take good care of the place, you will minimize the amount of work and stress for yourself and can just enjoy the extra funds.
Finding, and keeping, good tenants, relies on some work for you. Here are some ways to increase a tenant’s happiness and longevity in your property:
- Be respectful and always give at least 24-hour notice if you, or any workers, have to enter the property.
- Ensure all appliances, heating, electrical, and plumbing are up to date and kept in good working order.
- Respond in a timely fashion to requests for repairs.
- Maintain market rent. While you may have to slowly raise rent over time, it’s better to have a consistent monthly rent paid on time rather than raising it and causing a good tenant to leave.
- Hire a professional property manager to care for the property, especially if you don’t live nearby.
Holding onto a good tenant may mean softer rent regulations. You will have to gauge if it’s worth not raising rent so that your current tenant will renew their lease. By being a good, respectful, and responsible landlord, and properly vetting prospective tenants, you should be able to find a keeper.
While every landlord hopes to have their investment property permanently filled, it is not always possible. When calculating annual costs, try to factor in the property sitting empty for two months out of the year. This will give you some financial space to play with should the property fall empty.
Before applying for an investment property mortgage, make sure you understand all the facets of owning an investment or rental property. The more knowledge you have, the more you can avoid the pitfalls of an empty investment property.