If you’re looking to expand your portfolio, investing in real estate is a great way to start. It can produce a steady stream of income and can be the foundation of growing your wealth.
In this blog post, we’ll talk about buying and investing in real estate, and we’ll give you some buy-to-let tips on how to make it successful. We’ll also talk about the various factors that you should consider when it comes to choosing a buy-to-let property in Ireland.
1. Understand what it means to be a landlord
Before you start investing in real estate in Ireland, it’s important that you understand what your responsibilities as a landlord are. Most rental properties require some form of maintenance and management, which falls under the landlord’s responsibility. If you’re not prepared to handle these roles, you might end up with a lower profit.
One of the most important factors that you should consider when it comes to investing in real estate is the maintenance of your property. Doing so can help you save money on repairs and keep your house looking its best.
If you’re planning on investing in property management, then it’s important that you have a system in place that will allow you to manage your tenants’ payments and leases. You can also market the property to potential tenants to ensure that it’s filled.
2. Do the math
When it comes to investing in a buy-to-let property in Ireland, it’s important that you set a goal that’s conservative. For instance, if you’re planning on investing in rental properties, you should aim to get at least 1% of the property’s value in rent.
Your cash flow can be equal to the total income that you’re able to generate from the property, minus the various expenses that come with owning a property, such as taxes, insurance, and maintenance.
If you’re planning on investing in a buy-to-let property, you should aim to get at least 15% to 25% of the property’s value in the down payment. Even if you have a good credit score and a low debt-to-income ratio, lenders won’t give you a 5% or 3% down payment on investment properties. For a buy-to-let mortgage, they don’t want to risk their money on properties that have poor credit or have a high DTI.
3. Choose a location with high demand
One of the most important factors that you should consider when it comes to investing in real estate is the location. While you may be interested in buying local properties, it’s important to avoid areas where house prices have increased significantly.
Are there any expansion plans in the local community? This will allow more people to move into the area and start looking for a place to live. You can also check out local forums and social media groups as well as marketplaces to get an idea of the demand for real estate in your area.
4. Plan your exit plan
Most people have an exit plan when it comes to investing in real estate. For instance, if you’re planning on buying a home, you need to have a reason and an exit strategy. However, you don’t have to sell at that point to take advantage of the 25-year mortgage.
Using a calculator from the Bank of England, you can calculate the compound interest rate that’s been going up in real estate over the past 25 years. It showed that the prices of houses have gone up by almost double. According to saville.co.uk, houses can increase their value by over 300% over the course of a couple of decades.
5. Decide on a property type
There is a wide variety of buy-to-let property types. Some are suitable for singles and working professionals while others are preferred by families with children. You can also let a house in multiple occupations or a shared accommodation. These types of properties can also be used as holiday lets, AirBnBs, or serviced accommodations.
Before you start investing in real estate, it’s important that you consider the type of property that you want to buy. For instance, single-family houses are usually easier to run. On the other hand, other types of rental properties may require more work to maintain and attract more investors.
A flat may be easier to rent than a house. It’s not as likely to require outside maintenance or gardening, and it’s generally easier to rent a property without having to deal with the additional expenses. However, a rental flat may also have ground rent and service charges. These are usually payable by the landlord.
6. Calculate your expected returns
The gross yield of the buy-to-let property is an important factor in your decision. This is a measure of the return that a landlord is able to get from their rental property. It allows you to compare the returns that a buy-to-let investor can get from different properties.
The gross yield is calculated by taking the annual rent as a percentage of the purchase price. It takes into account various expenses such as landlord insurance and taxes. However, it’s also important to note that the government may still want a portion of your profits. In addition to these, the maintenance and repairs budget should also be set aside for either 1% or up to 50% of the rental income.
Although rental property can be an ideal option for some, it can also be hard to get it done due to the various risks involved. Before you start investing in real estate, it’s important that you consider the pros and cons of this type of investment.
It’s also a great way to build a property portfolio and earn a higher income. With the right guide, you can make the right choices and potentially make a full-time living from your rental property.