Is Rental Income a good way to make money from Property Development?
- Author Justin Trapp
- Published April 13, 2011
- Word count 506
When purchasing a property for development, many individuals think only in terms of purchasing, developing and then reselling a property. However, there is another way to make money from many property development projects. Rental properties can provide a viable source of income from any property that you have purchased but you need to keep a few realities in mind. Acting as a landlord is not a good fit for many individuals. Here are a few realities that you need to be aware of before you decide to purchase properties that you will then rent out.
Properties purchased for income purposes will have different costs and interest rates
If you are purchasing a property for the purposes of making money you will often find that the terms of your mortgage will be very different than if you are purchasing a property for private residential use. Often you will need a much higher down payment than you would need if you were buying a property to live in.
Tenancy is not always guaranteed
You may have a property available but it is not guaranteed that you will automatically be able to find a tenant to fill that property. This means that if you have a large overhead, in the form of a large mortgage you may find that it will be difficult to hold on to a property for a long enough term to make a profit on a property that you are developing.
In order to make sure that you do not fall into this kind of trap, it is important for you to research potential rental properties very carefully. You want to make sure you know whether residential or commercial properties have the best chance of attracting tenants and which areas of the city are most appealing to the kind of tenant you want to attract.
If you want to make sure that you are able to find tenants most quickly you need to look in established areas rather than up and coming ones. Although you may pay a premium for these properties the return may be in the fact that you are able to find tenants quickly and reliably.
There are ongoing expenses other than a mortgage or loan
If you are going to be acting as a landlord it is important for you to plan carefully. As a landlord you are responsible for many of the fixtures and appliances that are located in a property. If the property becomes damaged or a furnace breaks, for example, it is you that will need to pay for these repairs and not your tenants. Because of this it is important to do some careful financial planning that will ensure you have funds set aside for these eventualities. If you are not prepared to do so you may want to consider something other than acting as a landlord.
Taking the time to consider the many factors that can affect your income level as a landlord will help you decide whether this is the right financial move for you.
Justin Trapp is a Licenced Property Broker who writes about topics concerning Property Investment and development in the USA, To find out more about him visit his website www.us-properties-direct.com
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