Tips To Avoid Pitfalls In Owning Investment Property

 

Written by Sapphire of the Savvy Women Group

 

At Savvy Women Group, we know that owning and operating investment rental property can present some key advantages, such as appreciation and regular surplus income etc. In this same way, there are some potential disadvantages that could trip you up without the correct preparation.

As a property investment expert, I can help you minimize possible pitfalls, by following certain guidelines to protect your investment, which I have outlined below:

 

Manage your expectations

First, constantly make sure that your expectations regarding investing in rental property are reasonable and realistic.

You should always approach the investment of rental property with the goal of achieving a positive cash flow; however, do not expect to be able to buy a new vacation home within a year.

Did you know: you can compare the rent you charge with the average set in your region? To see how rents by property type have operated over the last quarter click here for the latest DPS Rent Index.

Important rules you’ll need to follow 

It is important to make sure that you take the time to do your research to ensure that you understand the rules and regulations, regarding the ownership and operation of rental property.

As the owner of rental property, you must abide by certain laws which provide specific information regarding your liabilities and responsibilities.

To learn more about legal/tax rules read our recent blog: Costs to consider when purchasing rental property.

Along those same lines, it is important to ensure any lease or rental agreements you handle are legal. If you handle a lease or rental agreement which is not legal, you may experience several problems if your tenant happens to violate terms of the lease. To be safe, it is best to have a lawyer draft your lease and rental agreements.

Only available to course members: sign up to our AQA accredited course on Tax rules, HMO’s, R-Buy, tenants & legal requirements.

 

 

Property inspection

Before purchasing any rental property, be sure to have the property inspected or else you may discover you are facing a set of expenses you did not anticipate.

Having the property inspected by a professional before you sign on the dotted line will involve an expense; however, compared to the expenses you could face by purchasing a property without an inspection, it is certainly well worth it.

 

Checking potential tenants

When you begin the process of renting out your property, take the time to run credit checks and call references. These are both steps which many novice landlords often overlook in their rush to fill their rental properties and begin turning a profit; however, it can be detrimental.

Remember that having an empty unit is always better than rushing and having an irresponsible tenant, who may destroy your property, get behind on their rent and ultimately prove difficult to evict.

 

 

Join the club

Joining the Landlords’ Association in your local area can also prove to be helpful by putting you in connection with experienced investors and landlords. You can also gain access to reliable contractors, inspectors and other professionals who can make the process of operating rental property much easier.

 

Liabilities  

It is imperative that you make sure you have adequate property insurance as well as liability insurance. Property insurance will help to protect your investment while liability insurance will protect you in the event anything should happen to someone while on your property.

 

Have you topped up your emergency fund?

Finally, make sure you take the time to establish an emergency fund to cover expenses which may crop up unexpectedly. Remember that you are operating a business and as such you must be prepared for those times when expenses arise.

The exact amount that you wish to contribute to your emergency fund is ultimately up to you; however, it should be sufficient to cover typical expenses that may arise.

The general rule of thumb is to put aside 20% of the value of your property. To make the process of establishing an emergency fund easier, consider setting aside a certain amount of your rental receipts each month into a special account.

As Savvy Women we want to be your first point of call, to access everything housing, business, property investments. Join our members only Investors Academy now and fast track your way into success.

 



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