Buying a residential rental property is a good step in the real estate business. However, I would advise that you shouldn’t barge into it without knowing what this is all about.
Despite having many people successfully running a residential rental property, still, it’s not easy money. There are obstacles, losses, risks, etc., but if you can figure it all out, then you find it a successful investment.
What Is Residential Rental Property?
Residential rental property is a home purchased by an investor and inhabited by tenants on a lease or other rental property agreement. Residential property is property highly marked specifically for living or dwelling for individuals or households; it may include
- Standalone single-family dwellings
- Multi-unit apartment buildings
We may contrast residential with commercial rental property, leased out to businesses in properties zoned explicitly for profit generation. The residential rental property can also be
- A single-family homes
- Condominium units
- Duplexes, and so on.
Residential rental property distinguishes this class of rental property investment from commercial properties, where the tenant will generally be a corporate entity rather than a person or family, as well as hotels and motels where a tenant does not live in the property long term.
Now, what do you need to know?
The property has to fit into what the people around it want
It is very crucial. If you are buying a residential rental property close to the campus, be rest assured that 95% of potential tenants will be students. If you intend to make it a family home, you may find it difficult to get renters who are not students.
If people are working class with good jobs, this will increase your residential rental property value because renters will be ready to buy at a premium price. It will help to consider people with a higher population before buying a residential rental property. If it works, you can go ahead.
Location is as important as the air we breathe
If you want a good investment return, you need to be keen on location. Location can strengthen your investment and, at the same time, kill it. It determines what value to place on the property. If you buy a residential rental property, renovate and furnish it in underdeveloped areas, you may be disappointed in hearing the value people place on it.
Also, suppose your residential rental property is in a place that is not all that motorable due to bad roads or the streets constantly getting flooded during heavy rainfall. In that case, this may be a huge obstacle to getting renters that would be willing to pay something worthwhile.
And what is a business if you are not getting anything from it?
Check out the taste of structures within the locality
You should highly consider the property’s locality because it’s a significant determinant of having people interested in your property.
Can you afford to have the property renovated to taste?
The property you are buying is not a new model; it is best to check out for structures around so you can make an adaptation or do something better. It helps you quickly get renters who are willing to pay its value.
Renting property is dicey
You can’t be good enough, smart enough, and do everything right. A little mistake might make you lose the property; the fault may or may not be from the tenants or anyone. Significant damage, such as fire outbreaks, can ruin your investment.
An economic downturn caused by anything, for example, a pandemic, may make you lose money because if your tenants are unable to pay or move out without anyone showing interest in occupying, it’s a significant loss on your part.
You are responsible for maintenance
As much as landlords try to avoid this part, at the end of the day, it falls back to you as the property owner. That is when you will remember that it is your house and the responsibility to keep it together lies with you.
It is a significant reason some landlords take maintenance fees from tenants in case of damage. However, this fee can cover a little of the damage. The significant repairs still lie with the landlord, whether he is willing to.
Apart from having damages, maintaining a house is the only means to keep a property whole. You have to check things out, You have to make adjustments, and you have to do repairs. All of these rest on the shoulders of the residential rental property owner.
Get everything documented
It would help if you documented everything about your property. One such is “agreement.” In Nigeria, many people take things for granted, which may become a more significant issue sooner or later. Some houses have no landlord-tenant agreement for whatever reason.
It shouldn’t happen in normal circumstances. When push comes to shove, that agreement which seems like a piece of paper to many might be the only evidence to bail you out. And all documents concerning tenant evaluation and rent must be considered too.
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