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Four Key Questions To Ask Before Investing in a Rental Property

For those of you looking for a property to invest in, there’s so much that needs to be researched and considered before deciding whether it will make a worthy investment for you. If you’re looking for a property for rental purposes, it is definitely not something that anyone should rush into before considering a number of factors.

Factors such as the average rental price in the local area, how many properties are lying vacant in that neighbourhood, and the potential costs of maintenance all need to be considered before you decide to place an offer. These combined factors will determine how much you’ll be able to rent out the property for in the future, and just how much of a return on your investment you’ll actually make.

There are four of the key questions you need to ask when looking at investing in a property to rent out:

1. How old is the property?
A property’s age is important to know before you decide to invest in it. The age will determine how much maintenance and upkeep is required. The older the property is, the more likely it is that you’ll need to invest a fair bit of money on repairs and maintenance. Certain items such as plumbing and heating systems can become faulty over time and repairs can be expensive. The exterior areas of the home are bound to require upkeep as they tend to get worn or tired over time. All these elements will quickly add up if you decide to invest in an older property.

Newer properties, usually those that were constructed after 1980, tend to be built using materials that are safer for residents. This was the year when the use of materials such as lead paint or asbestos was made illegal for building purposes. This is because the chemicals in these materials can harm the health of those living nearby. If you’re looking for an investment property, look for one built after 1980 to be on the safe side.

2. What is the neighbourhood like?
And we don’t mean just the actual location of the property. No matter how well located a property may be, you need to evaluate various elements of the neighbourhood to decide whether it is worth investing in. For instance, if you discover that the neighbours themselves are difficult to get on with or may cause issues for your tenants in the future, then steer clear of the property. Ask around to find out if there are any such neighbours in the area, though this is often something that you only discover after one of your tenants reports it!

One thing that you can easily spot yourself is the physical appearance of the neighbourhood. Make some visits beforehand to see if you can spot any trash left around or any unsightly or run-down homes and yards that may make the neighbourhood less appealing for future tenants.

You may also want to keep an ear out during these visits to check if there is any noise polluters such as incessantly barking dogs or neighbours playing loud music. These are all things that could drive potential occupants away from your investment property.

3. How much maintenance will be required?
Maintenance can be a difficult element to estimate, as it isn’t a fixed expense. It is generally recommended that you factor in that you will need to invest between 1-2% of the property price on maintenance and repair. On top of that, you should do the following to get a more accurate estimate:

Estimate when the roof will need replacing. If this will be less than three years, you should add around £15,000 to your property purchase price. If it looks like it may be able to last longer than that, you’ll have more time to save up for it and don’t need to factor it in as an upfront cost.
Look out for any signs of water damage, as this may be a recurrent issue that you need to pay to resolve.
Inspect the exterior of the property for any signs of rot or damage that is covered up with paint.

4. What is the landscape of the property like?
An area that is often overlooked when the focus is on the property itself, the wrong landscape could potentially cost you a fair bit of money in the future. Take a closer look at the trees on the property’s landscape to find out whether the roots could be disrupting any underground utilities such as outdoor sewer lines. They could also potentially be causing damage to the very foundation of the property underground. This can be an expensive problem to fix, so look into it before making your investment.

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Alex Wright, Editor