Questions to ask before buying a Rental property
The quest for a steady income stream is often an unavoidable desire in a Man's life, however, in the pursuit for multiple source of income with peculiarities to real estate as a source of investment, we enlighten in the most simplified and explanatory form questions you can ask before investing into a real estate rental property.
Is real estate generally a good investment?
The decision to invest in real estate is profoundly personal, but it's vital to grasp the potential financial freedom it could offer. Two compelling facets beckon:
a) Appreciation: We know a used car is worth less than a new one. Unlike a depreciating used car, real estate tends to appreciate over time. Your N120,000,000 property today could burgeon to N235,000,000 in just a few years. Your property's upkeep and enhancements can also shape its appreciation.
b) Cash Flow: Reliable tenants can usher in steady rent checks, which well consistent should surpass your monthly expenses. It's imperative to consider real estate in the context of its associated risks and benefits when weighing it against other investment avenues like stocks and other higher risk investment.
What property suits my capability and Needs?
First and foremost, you must decide whether or not you will live on the property. If so, a duplex or multi-unit building will be necessary.There are some advantages of living in your own rental property. For one, you’ll be able to save money on paying rent somewhere else and choose to use the money for other things like buying another property. Second, you can ensure that your property is being used properly.
Where should I buy my rental property?
If you plan to handle maintenance and odd jobs yourself, you’ll need to look in or near your current community. But if you plan to outsource the day-to-day operations, you have many more options. One factor you’ll want to consider is the appreciation rates in the community over time. As with stocks, it’s best if you can buy low and sell (or rent) high — but as with stocks, there is no guarantee that prices will continue to rise. The best you can do is look for places where prices have been increasing steadily.
What is being built nearby?
Any new infrastructure project can change an area completely, both positively and negatively. Do your research to find out about development and infrastructure plans in your area and when they will be completed. Once you know what is being built, do some research to see how similar projects in other areas impacted property values, and demographics and decide if it’s right for you.
How will I finance the purchase?
One of the benefits of owning a property is the ability to use leverage — sometimes known as OPM (Other People’s Money). If you take out a mortgage, you may be able to pay off the loan and gain full ownership of the property in a couple of years.
Even if you have enough money to buy your property outright, it may make sense to keep that cash liquid and take out a mortgage.
Are the documents in order?
You don’t want to get stuck in a legal case that has to be with fraud, corruption or even money laundering. So before buying a rental property you need to make sure the property is legitimate and has all the necessary documents in case of a search by law enforcement bodies.
Investing in property is an exciting wealth-building opportunity, but thorough questioning and research are vital.