This year has been a rollercoaster for the housing economy. The high demand for property coupled with the low supply has surged the prices. Governments make things difficult with every new policy they add to the neverending list of housing regulations. There is a silver lining; new technological innovations have streamlined buying a rental property.
Additionally, some countries have become a hotspot for real estate capital. You don’t have to invest in your region but reap the benefits of a good investment from miles away.
There’s nowhere we’d recommend investing more into than the UAE, especially Dubai. With its giant skyscrapers and urban lifestyle, Dubai properties are the go-to choice for investors across the globe.
Set Your Criteria and Do Your Research
Strategizing and having a clear mind when you buy a rental property is paramount to finding the right place to invest in. Excessive optimism will do you no good because any mistake may be costly.
Here are some questions you can ask yourself to understand what kind of property to look for:
- Are you looking for an apartment? A bungalow? A regular home?
- Do you want your investment closer to the city or further away?
- What budget do you consider?
- Are you willing to renovate your property or looking for something readymade?
- Are there any features you’d expect residents to want? Such as a backyard, a pool, etc.
- What’s the average rent within the area you want to buy a rental property in?
- How much does maintenance and upkeep cost?
Once you’ve selected a place, also account for any property taxes, insurance, and repairs and calculate the return on investment. While it is too much work, preparation pays.
The excitement of buying a property can quickly drop as you see the ludicrous prices listed across real estate sites. Sadly, the world of real estate does not open its doors to the less fortunate, but with the right financing, you can still get through.
Most investors consider financing a viable (sometimes the only) option to buy a rental property. Financing is necessary because it gives you a huge chunk of capital without waiting years to save up enough to buy a property.
Financing varies from region to region. Before you ask for a loan, make sure you:
- Evaluate your credit score. Any bank or lender will ask you to explain any irregularities in your credit score, so address them as soon as possible.
- Tabulate the costs. Research and note down the cost of down payment, mortgages, etc.
- Check loan providers and types. Instead of going to banks, you can visit local credit unions to get better deals. There are also many types of loans, such as hard money loans and conventional loans, each with different pros and cons.
- Prepare and document. Most lenders naturally want you to show pay stubs or tax forms to approve your loan, so prepare this documentation.
- Get pre-approval. With a pre-approval, you’ve now certified you’re a legitimate buyer. It will give you priority over unapproved buyers; sellers would strike up a deal with a legitimate buyer.
Making an Offer
Reaching the right price is a challenge, especially when the buyer and seller have different expectations. But it’s about more than the price. When you make an offer, you display a serious interest in the property.
When presented with a reasonable price, any buyer will relent. But you can’t make a good deal without having all the facts at hand. To get to that point, you’d need to search and compare similar properties in the market to prove you understand the worth. You also need to know how far you’re willing to go with your budget. Don’t overextend yourself trying to get the property; stay within your price range.
It can help to communicate with the seller beforehand and get on good terms with them. Being prepared with an offer letter is also a great strategy, as most people prefer to get things done quickly. Make sure your letter has contingencies in place to protect you before it’s signed, such as requesting a home inspection from a verified home inspector.
Close the Deal
Once you’re here, congratulations! Not many people make it to this point of the deal.
Double or even triple-check your information. Schedule a home inspection to make sure there are no issues that go unnoticed or hidden. Re-evaluate the appraisal and check for discrepancies. Get your homeowners insurance as proof for your lender and verify the title is free from disputes. Finally, sign the necessary documents that signify the sale of the property and fully transfer it in your name.
Managing the Property
The journey you’ve undertaken to buy a rental property ends here. However, your journey as a new homeowner has only just begun!
Being an effective manager goes hand in hand with being a property owner. You want to manage your resources to ensure that your tenants are satisfied and that the property is maintained and problem-free. Key points to keep in mind are:
- Screen your tenants. You don’t want them being a nuisance to others in the neighborhood or damaging your property.
- Set reasonable prices. You want to match prices being given in your area, so set a competitive rate that works in your favor.
- Collect rent consistently. The best way to avoid getting swindled is to leave no room for vague misinterpretations and be precise and regular when getting what you’re owed.
- Maintain and repair as necessary. Make sure your investment is fixed whenever something goes wrong and address tenant requests regarding it quickly to avoid escalating matters.
Beyond that, tools and software can help manage your property. You could also hire an administrative person to handle these tasks and save you the trouble. All the best!