If you’re looking to purchase your first investment property in 2019 as a way of building wealth for the future, it’s important to go through the process carefully. After you have saved so diligently and worked hard to get enough funds to make your investing dream happen, you need to ensure your money is spent in the best possible way and that you don’t have any big, costly hiccups along the way.
To help you get the best possible profits from your investment, read on for some key ways you can protect yourself as you make the purchase and proceed afterwards.
Approach the Investment in a Professional, Business-like Way
When you buy a rental property, remember this is an investment, and it needs to be treated differently than when you buy a personal home. Approach your investment in a professional, business-like way, where you take the emotion out of finding the best property and then renting and managing it. The book-work side of things has to be done professionally, too.
For example, when buying a property, don’t opt for something just because you like the look of it and would like to live there yourself. Instead, consider the area’s potential for capital growth and the home’s potential for rental income. To get the best income possible, avoid renting out the property to anyone you know well, such as friends or family members. This can get tricky, as you’ll likely not want to charge people in your circle the top rate, and you will likely find it challenging to chase up any unpaid expenses in that situation, too.
Always screen potential tenants before you allow anyone access to a property. Find out what their rental history is like, if they have paid their rent on time and in full in the past and how they have taken care of properties. Don’t fall for sob stories if people get behind on payments either; ensure overdue bills are chased ASAP. If you have continuing problems, don’t be scared to take further action.
When it comes to seeing your investment like a business, also make sure you set up a separate bank account for all transactions relating to the property, both incoming and outgoing. This will keep deposits and upkeep costs separate from your personal ones and make it much easier to sort things out come tax time.
Select the Best Possible Property Manager
Unless you want to handle the management of your rental property yourself (which is only possible if you live in the same area as your investment and have the time available for the job), you’ll need to select the best possible property manager to handle things on your behalf.
Choose this person/rental agency with care. You’ll find most suburbs have numerous options to pick from, so talk to a variety of people to find out exactly what fees they charge, how often they inspect properties and what their leasing rates are like.
Make sure you learn if they will handle a variety of property maintenance tasks and repairs and what kind of costs they add to their bills for this. It’s good to select a leasing agent who has a variety of go-to tradespeople to contact if urgent repairs are needed, such as a firm like Service Master Restore for water or mold damage, or people who can handle plumbing, electrical, construction and other work.
Consult With Advisors
Next, make use of advisors to help you set up your investment in the best way possible. In particular, speak with an accountant and lawyer before you purchase a rental property and then as you go about buying one, exchanging contracts, renting the home out and more.
Your accountant, for example, will help you structure the ownership of the rental property in the best method for your financial situation (e.g. you might buy the home in a company or trust name, rather than your personal one), and they will provide you with tips on which expenses you can and can’t claim on taxes.
Your lawyer should read over a purchase contract carefully before you sign anything and advise you on whether there are any potentially risky clauses that need to be tweaked or additional language that should be added in to protect your interests. They can also provide details on your rights and responsibilities as a landlord and ensure rental agency agreements you plan to sign will cover you properly.