Buy-to-let property can be one of the best investments you can make. It is a fantastic way to boost your finances, and despite economic pressures from the Covid-19 pandemic, the property market has continued to thrive. Buy-to-let refers to the idea of purchasing a property to rent. There are many reasons why the investment strategy is so effective, but with constant monthly income and house prices continuing to grow, real estate can help you make serious money.
In fact, investing in real estate is one of the top 10 creators of billionaires. While you are unlikely to make millions in the short term, property investment can help you earn income regularly without having to work for it directly.
If you are considering property investment, and want to earn regular passive income, here are three tips for starting a buy-to-let property investment business.
Do property market research
Before starting your buy-to-let journey, it is essential to know exactly what area will be the most secure for your money.
Not every area offers the same investment potential, with the average house prices and rent fluctuating from postcode to postcode, city to city, and state to state.
It is important to consider rental yields, tenant demand, capital growth, and predicted market price changes before investing. These aspects are significant factors to ensure your investment is as safe and secure as possible.
There’s no point investing in an area with low rental yields and depreciating house prices, as while you make income in the short term, you won’t enjoy the eventual pay-out when you decide to sell your home.
Rental yield and capital growth are essential in this aspect. Rental yield refers to the amount of return you will see on your investment through rental income. You ideally want to invest in high rental yield areas as you will soon see vast profits on your original investment.
Likewise, capital growth is just as important. House prices in the US increase by 5.3% each year on average, so you will want to target an area where house prices rise at their highest rate. This way, in two or three decades, you can sell your property for a considerable profit.
Know your tenant profile
Alongside your research into the market, you should also consider exactly what tenants you hope to attract.
If you aim to buy a property in an area concentrated with young professionals and students, you should consider residential property. On the other hand, if you invest in an area with booming businesses and investment, you could consider commercial property. Although it is important to note, a residential property typically offers better rental yields and is cheaper than commercial property. You can check out some top tips from industry experts like RWinvest who offer free online guides for further information.
It would also help if you considered what tenants want. Covid-19 has caused a lot of people to stay indoors and isolate themselves in their homes. This has led to a change in tenant demands, with people wanting green spaces, fast internet, and a place to work from home. When looking for a property, you should consider these facilities to ensure interest.
Consider a property management company
For many investors, the biggest stumbling block that stops them from wanting to invest in residential property is the demands of being a landlord.
Landlords have to consider tenant demands and collect rent. This can be difficult if you already have a full-time job, live away from your property, or own multiple properties.
The best way to circumvent this is to consider a property management company. Property management companies can act as a 24-hour point of contact for your tenants and help alleviate pressure by collecting rent.
This means you can truly earn passive income without having to work.