If you are thinking of trying to invest in real estate then there are a few things that you should consider before you put a lot of money into some property. Real estate can be a safe bet if you know what you’re looking for – but it is not easy money. Being a landlord is hard work. Flipping property is high risk, and even commercial property comes with challenges.
Single or Multi Family For Landlords?
A lot of people get their first start in real estate by either renting out their first home when they upgrade, or by buying a second property on a buy-to-let mortgage. This can be a low cost way of generating some residual income, and if you’re renting out a property that you used to live in then it’s low risk and it could be a good way of monetising the property if you are having trouble selling it.
Buying a property just to rent out is riskier, and even more so if you don’t know the area well. Buying a portfolio of properties adds even more challenges – do you know whether the property will attract tenants? How high maintenance will those tenants be? Will they pay their rent on time? If you have a mortgage outstanding on each property, then even a low vacant property rate could be financially crippling for you.
This is where multi-family properties come into play – these properties are more affordable for you as a landlord, and this means that there’s more leeway in terms of allowing for some of the properties to be vacant. Some landlords who are just getting started live in the block themselves, which means that it’s easier to do repairs, etc, and they save a lot of money on maintenance. In addition, when you have a multi-family property, you are just doing one lot of research and marketing, and getting several income streams from it.
Loans for commercial property tend to be much shorter term than loans for residential property, which means that you will need to plan much more carefully before you take a property on. It is possible to get high loan to value ratios for commercial property, but you will need to shop around and you will need a good business plan.
Office properties are a good starting point for many would-be investors, because they tend to be lower maintenance and you can often find tenants that are either established, or that have grant funding from the government, giving you some confidence that the rent will be covered for a while. Do your due diligence when it comes to your properties, and tenants as well. Make sure that there is room in any financial plans that you make to allow for under-occupancy, and for tenants that go delinquent, because such things will happen to you at some point in your property owning career. You need a buffer to allow you to cope with those things and still sustain the property and service your mortgages. To know more about us visit the website or contact us.