Buying land for a new development

Purchasing Rental Homes: 3 Things to Consider When Calculating and Assessing Property Income

The latest data released by the Australian Bureau of Statistics claim that more and more Australians are opting to rent rather than mortgage or purchase their home. Sweeping up some of the cheaper real estate properties on the market and transforming them into rental properties can really turn a huge profit with time. As there are quite a lot of listings available on the market, spend some time calculating and assessing the possible property income of each place before making an offer. Here are 3 things you need to consider.

Rate of Growth in Community and Ability to Increase Rent

Understanding how desirable the real estate property is now and may be in the future may not give you a definitive number to factor into your calculations; however, it can give you a good idea as to which property may be more profitable in the future than others. When looking at the listings, you'll want to consider the neighbourhood that each property is in and if the community is growing. If there are plans to develop land in the surrounding area, you can expect the place to become more and more busy with time. Your property might end up becoming more desirable as a result.

You'll also want to consider whether the people living in the neighbourhood are more likely to purchase or rent their homes. For example, if the house you're looking at is located near a university or college, there's a higher likelihood that your property will be desirable to students. The more desirable a property is, the easier it will be to increase rent.

Set Annual Costs like Property Tax and Home Insurance

While a property may seem like an ideal candidate on paper, you should also consider the expenses that are associated with the property. In particular, you'll want to consider the annual costs of maintaining or keeping the place even if you don't have a tenant. This will include expenses like property tax and home insurance. Factor in how much profit you'll earn from renting out the property after you pay property taxes and home insurance.

You should also consider what your losses may be should you not be able to find a tenant. For example, this might happen if your tenant moves out prematurely and you are unable to find someone else to rent your place.

Growth in Property Value

Your profit from the property does not only come from rental income. It's important to also consider whether you can expect growth in the property value. It's important to determine whether or not you're likely to make a profit if you were to sell the property at a later date. At times, growth in property value may actually exceed the rental income you have been collecting throughout the years.

Don't just look at the numbers when looking at which real estate property may be best for transforming into a rental home. It's important that you consider other external factors as well in order to determine how profitable a piece of real estate may be in the future and if it will be worth the investment.