Find your Rental Property

You have now had access to the first two articles in this mini series of 3 articles :

Your Cashflow (article 1)

Calculating your Budget (article 2) .

This is the  third and final article of the mini series,  and is titled :  Find your Rental Property

Find your Rental Property

The first part of this process is for you to have a desire to start to build a rental portfolio of your own.

You have assessed the costs involved against the potential returns on rental income.

You have estimated  the capital growth prospects of your rental property over the short term, ( 3 years )  medium term ( 6 Years) and long term ( 10 years + ).

Now you are in a position to find a suitable rental property.

Finding Rental Property :  Areas covered in this article include the following :

Repossessions ..  Watch local papers and look for property to let ..  Look for property for sale signs ..   Local Investors Club ..  Other areas to remember ( and Emergency Funds )  .. How to avoid overpaying ..  Check your Costs  vs Income ..  A touch of Realism does nobody any harm!  ..  Repair costs ..  You are ready now

Repossessions

One of the best way to purchase rental properties is to be able to find out about houses or flats that have been repossessed.

When a property has actually been repossessed,  it is so hard to actually know it has been repossessed unless you have your “nose to the ground” and contacts with surveyors,  estate agents or bank personnel.

These sort of people hear first when a property is about to be repossessed.

With a repossessed property you have the chance to put in an offer below value and with an early entry date, as the lender will be keen to get the property sold and off their books.

Watch local papers and look for property to let.

The person who is letting the property may have had it empty for some time,  and may be considering selling.

You have to ask yourself why it is empty,  but it is certainly worth a short phone call! Remember,  “If you don’t ask.. you will not get!”  This type of phone call could open up many areas to explore with the owner.

At the very worst,  he might say “ No” .

Look for property for sale signs and contact the owner.

Don’t go through the agent selling the property.  Just knock on the door and have a chat with the owner.

You could join a local Investors Club.

Most countries have National networks of property investors with links to local groups, which will hopefully be close to you, within the Investors Club Network.

Other areas to remember ( and Emergency Funds )

As part of your rental property purchase process, it would help if you have extra cash left over after you buy to allow you to cover the inevitable “unexpected costs”.

As a general rule of thumb, for each rental property you are buying for your rental portfolio, try to have a at least 1 month’s rent available ( or even more)  as an extra “safety net” for larger costs.

It is always a good idea to have access to emergency funds via a line of credit perhaps secured on your residential home.

You may never need to use it, but it is always better to have it set up, rather than finding that should unexpected high costs occur, you have to rush into expensive borrowing rather than dipping into your accessible line of credit for such circumstances.

How to avoid overpaying

Obviously when you buy a rental property for your rental portfolio, you do not want to overpay.

Depending on how the property market is acting will determine how close to survey value rental property investors are paying for their rental property.

You may find properties are selling below value or close to value,  however,  you may also find demand is so high that prices being paid are 25% or 50% or more over the survey value.

As a purchase price guide, here is a rough calculator to help you arrive at a realistic purchase price :

Try to estimate what the property will be worth after all necessary repairs are made and only offer up to 70% of this “ repaired” purchase price,  less the repair costs.

Please note property markets differ everywhere, and this formula may not work in your area, but it will help in your decision making process.

Check your Costs  vs Income

Whatever system you use to calculate your purchase price, you must ensure that the property rental income covers your out-of-pocket expenses which include mortgage payments, maintenance, insurance and taxes.

A touch of Realism does nobody any harm!

To add a huge dose of realism into your Find your Rental property calculation, you are best to assume 10 months occupancy in every 12.

Repair costs

If the rental property you are considering is in need of repair, don’t guess the repair costs; get a local handyman to give you an estimate for putting the rental property to rights.