It was not surprising that the whole COVID-19 situation shook the foundations of the property rental market not only in Australia but in the whole world. Workers worked from home. Offices were vacant and so were properties that cater to the employed market.
However, through the help of the government’s strict measures against the virus, the economy was cushioned for heavy blows. In fact, as early as June 2021, some businesses were already in the last phases of their preparations to return to the office.
And that also spells good news for the property rental market. Rental property owners must be ready by now for the comeback of the economy.
If you are new to the field, this could be a great start for you. Now, before you dive into this venture fully, you have to ask yourself these questions to make sure that you are ready.
How much will you be charging?
This is a business, and businesses have a general goal of making profits. However, it is not a simple case of addition and subtraction. There are many factors that you have to consider when charging rent.
If you own the property then this is not much of a problem. Most investors follow the 50% rule, meaning that 50% of the amount you should be charging for rent should cover the payment for your mortgage.
If you are planning to use your rental income to repay your mortgage loan, you can consult your broker or use a loan repayment calculator to keep updated with your outstanding balance.
The other half of the rent must cover the operating expenses fully. You must include all the things required to keep the place up and running. You should also take into account the vacancy rate.
The mortgage payment that gets covered by the rental income serves as your profit. What should have been an out-of-pocket cost is now getting paid by the business.
Who is going to manage the rental property?
When discussing having rental properties as a business, most people don’t really get to discuss the late-night calls, the leak reports, the missed monthly dues, and other stresses that having tenants bring.
You have to decide whether you are ready to handle all these things by yourself. If so, technology has come far enough to come up with property management software solutions to aid people like you.
They are subscription-based services that will provide you with tools to manage your finances, handle your accounting, and even centralize communication with your tenants.
There are also companies that help manage properties on behalf of the landlords. If you decide to use such a service, make sure this is included in the operating expenses.
Who do you know in the rental property business?
Networking is an important aspect of business, especially in an industry that requires dealing with people directly. Having a solid network of like-minded people will help you navigate the real estate world more smoothly.
You also get to connect with potential lenders and renters in a big network.
While experience is the best teacher, non-experience can also be beneficial, but only if you know the right kind of people. You can easily avoid risky situations after heeding a piece of advice from a friend or a person in your circle who had to go through the problem himself.
Basically, before getting started with any business, you have to gauge your readiness. Sometimes, other ventures let you dive in headfirst without much preparation, but real estate is not one of them.
Just the finances and the legal requirements you have to handle when owning a property is already so much work. This is why it is important to have a reliable and experienced person to help you along the way.
For mortgage concerns, consult an experienced agent now!