Investing in real estate is a strategic way to build generational wealth. This is a path that we should consider at some point in our lives. So, if you’re thinking about buying a house soon, you’ve come to the right place.
I’ve put together a simple guide to help you make an informed decision when you’re ready to buy your first rental investment property without making mistakes. Consider this your BEGINNER’S GUIDE TO RENTAL PROPERTY.
1. Location
When investing in rental properties, your first consideration should be the location. This is a critical factor because it will determine whether you make a profit or a loss in the long or short run. The type of tenants you attract and the vacancy rate you charge are determined by the location you have chosen. For example, if you have an investment property to rent in Ikoyi and Agege, the type of tenants and vacancy rate will be different in each location.
What is the area’s proximity to the market, recreational centers, and prominent businesses, as well as its future growth rate? These are some of the critical questions you should have answers to because they will determine the success of your investment in the future.
2. Property Types / Budget
When starting a rental property investment venture, having a budget will help you decide which market to target. It will assist you in determining whether it is a family-sized accommodation (duplex), bachelors/spinsters (apartments), or student accommodation.
3. Social Amenities
I understand that the goal is to rent your property, but you should also consider the benefits to your prospective tenant. Are essential social amenities such as clean water, good access roads in and out of the area, and reasonably stable electricity available? I understand that the lighting situation in Nigeria is not ideal, but some areas have a fairly stable power supply.
You can also look for current or planned parks, malls, fitness centers, movie theatres, public transportation hubs, and other amenities that attract renters.
4. Rental Income
The goal, as previously stated, is to make a profit through rental income. Knowing the average rent tenants pay will help you decide how much to charge. You don’t want to charge too low or too high. If charging the average rent is insufficient to cover your taxes and other expenses, you must continue your search. Make sure to do enough research on the area to predict where it will be in five years.
5. Security
You don’t need a seer to tell you that no one wants to live in a high-crime area. When deciding to buy a rental property, security is an important factor to consider. You should find out about the security level in the area where you want to invest. Getting to know the locals is one way to get the information you need. Look for vandalism rates, serious crimes, petty crimes, and recent activities.
6. Number Of Vacancies
When a specific area has a high number of vacancies, this can be either a bad or a good sign. As a potential real estate investor, you must ensure that this is the case.
You need to know if people are leaving the area or if it is a new area with potential for future growth. You should also consider whether you can fill any seasonal vacancies. The vacancy rates will also tell you how successful you will be in attracting tenants. Due to high vacancy rates, landlords are forced to reduce rents to attract tenants. Low vacancy rates enable landlords to raise rental rates.