Investing in property is a great way to make money, but there are considerations that have to be made as well. You can’t make money unless you know all the financial hits that are going to be coming your way.
Rental Rates
Deciding how much rent you are going to charge is one of the big considerations for investors. This is how you make your money if you are a buy to let investor. You need to make sure that you are charging enough in rent to make sure that you cover all your costs and make enough money. You should decide on a percentage of the amount you originally paid for the home that you will charge to the tenant in the form of rent. This is known as the rental yield. And if you set the rate too low, you will find that you never cover your costs, and that’s not a good thing at all.
Capital Gains Tax
If you are the kind of investor who buys a home, makes some improvements and then sells it again, you will pay capital gains tax. You need to understand how this works because you will have to pay the tax, and that could affect your overall bottom line. Follow the link to find capital gains tax examples. The capital gains amount is the amount of money you make when selling the property that you previously bought. So, the bigger your profits, the bigger your tax bill at the end of it. As long as you’re aware of all of this and factor this into your overall calculations, you should be fine.
Small Costs
There are many minor costs that are associated with buying and selling a home. For example, there are all the costs and fees that are associated with buying a home and using an estate agent. Those estate agents are not going to work for you for free, so they’re going to demand a fee. And then there are lots of other things like stamp duty and land tax. Also, it’s a good idea to have a survey of the home carried out to make sure that it is 100% structurally secure and habitable for the tenant. That costs money as well. Finally, when the property switches hands, there are the conveyancing fees that you have to take into consideration too.
Property Maintenance
When you are a buy to let landlord, you are responsible for the upkeep of the property. This is very important because the law says that the landlord has to offer a safe and adequate home for tenants. All those small kinds of maintenance jobs become costly over time. You need to learn how to budget for these maintenance jobs because sometimes they can come out of nowhere. If you don’t have a bit of money set aside for these kinds of tasks, you can quickly run into financial problems. So, you should make sure you are prepared for everything that could be thrown your way.
