Investing in rental property can be an excellent way to grow your wealth over the long term, yet it is important to make smart decisions along the way.
Of course the most important choice is where and what to buy – but how do you know where to start if you’ve never bought investment property before?
An excellent place to begin thinking about your future investment purchase is by giving some consideration to the people who will be providing you with a rental income: your future tenants.
As you can probably imagine, there are tenants of all different sorts out there, from the trustworthy and reliable through to the … less trustworthy and reliable.
How do you guarantee you attract the right sort and don’t get stuck with the less desirable kind?
Unfortunately, there is no way to guarantee that every tenant you take on will turn out to be a model of renter decorum. However, you can stack the deck in your favour by doing some intelligent prep work and ‘paving the way’ for the kind of tenants that you desire.
Define your ideal tenant
Before you even start looking for properties, sit down and list the characteristics of what you would define as the ideal tenant.
Now obviously, at the top of the list will be “pays rent on time” and “looks after the place”.
However, try to delve a little bit deeper. From where will your ideal tenant derive their income? Are you okay with contract workers or freelancers, or would you prefer someone with a steady nine-to-five job? What about students?
If your future tenants have a party, would you prefer it to be of the ‘house’, ‘dinner’, or ‘birthday’ variety?
For various reasons, you may prefer a group of students, a professional couple, a young family, retirees or indeed a single occupant.
A lot could ride on whether you plan to personally handle landlord duties or engage the services of a property management firm.
Put yourself in their shoes
Now that you have a clear idea of the sort of tenants that you’d like to attract, you can start to look for properties that are likely to appeal to them.
If you hope to take advantage of the regular demand for student accommodation, that may mean looking for investment opportunities in the vicinity of education institutions, or at least close to main transport corridors.
Young professionals often look for places close to bars, cafes and other entertainment and culinary hotspots.
As for families who rent, they are more likely to prioritise the proximity of schools and the child-friendliness of neighbourhoods.
Take that perspective to market
Just as you have your own set of must-haves when it comes to buying your own house, incorporate those of your ideal tenant when selecting a property to invest in.
Location will be a big factor, but so will appearance. Uni students may not mind a bit of wear and tear around the place, but professional couples have often reached a stage where they want – and can afford – to live in a bit more luxury.
That could mean that in order to attract the type of renters you seek, minor – or not so minor – renovations may be required.
It should also steer you in the direction of the sorts of properties to look at purchasing.
Relatively low-maintenance inner-city townhouses can be popular with professionals in their 20’s, for example, while fully detached houses in the suburbs with their own backyard and garage will likely appeal more to families.