7 Factors to Consider Before Investing in Rental Property

Monday, March 22, 2021



Investing in your first rental property is an exciting adventure and could be a perfect little money-maker. It’s not a decision to be taken lightly, however, and there are several important factors to consider. There are different options to choose from, you could lease the property on a long-term basis or even as just a vacation home. The choices available to you will also depend on your budget and current financial situation. There are more than just financial aspects to consider, you’ll also have certain responsibilities as a landlord, and you need to ensure you’re cut out for it. Here are a few factors to bear in mind before investing in rental property.

Long-term and short-term options

Consider all the available options. You could buy real estate with the intention of renting in on a long-term lease. The advantage of this is that you’ll likely receive more consistent income. Of course, this depends largely on choosing the right tenants. Another option is buying a vacation home or hosting through Airbnb. This way you can rent out the property on a short-term basis but charge a higher rate. Think about your plans for the future and speak to a financial advisor to figure out the best option for you.

Your financial situation

Figure out what you can afford according to your current financial situation. Before investing in your first property it’s advisable to clear any existing debts, simplify your finances, and ensure you’re in a comfortable position. A financial advisor will be able to help you here as well. If in the future you want to buy any more properties, focus on how you are going to budget for these. Consider all hidden costs such as taxes, repairs, and insurance.

Requirements and responsibilities

As well as being financially responsible for the property you’ll also have certain landlord obligations. These will be clearly outlined in the contract. Whether you’re leasing long-term or just for vacations, you’ll still be responsible for maintaining the property. This also means being prepared to be contacted at a moment’s notice and expected to resolve problems. It helps to be handy as you may need to carry out certain maintenance yourself. Think about whether you have the right personal characteristics and skills to be a landlord.

Financing options

There are various financing options you can research before making your decision. If you finance the property you will increase your monthly outgoings but get a greater return on investment. If you choose the wrong kind of loan according to your situation, this could have an impact on the income you make from the property, however. Here is a complete guide to financing an investment property.


The value of real estate and its appeal to renters depends greatly on location. If you want to invest in a rental property for tenants to live in on a long-term basis you need to factor in local amenities. These include public transport options, schools, stores, sports and recreation facilities, restaurants, nightlife, and more. If you research the area well you can find somewhere up and coming that will likely be a better investment. For a vacation home, you need a tourist destination with plenty of cultural appeal. Alternatively, you could invest in a property on the coast or near areas of natural beauty.

Profit margins

You need to consider how much income you’re realistically going to make from the investment. You can learn how to calculate rental income online. This will depend on several factors. These include the area, the type of property, and the lease. Speak to an impartial financial advisor to understand more about profit margins and return on investment. You could also do some research online or network with other landlords.

Hidden costs

Mortgage interest rates are generally higher on investment properties. Calculate different types of interest rates online and compare hdb loan interest, with rental properties, and traditional mortgages. There are also other hidden costs to consider. These include operating expenses, emergency repairs, and insurance. If you’re looking for a rental property, it’s usually more cost-effective to go for a newer place that’s not in need of too much renovation. Flipping property is more lucrative if your intentions are to sell, not to lease. If you find a cheaper property that needs expensive maintenance this might not be worth the extra costs. Be sure to discuss all your possible options and finances with an independent advisor, and you’ll be able to make the right decision for you.

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