Buying a second rental property can help you to expand your business and bring you closer to your investment goals. However, managing multiple properties carries new challenges. What are the advantages of owning multiple properties, and how do you you know if you’re ready to buy another investment property?
The advantages of adding another rental home to your portfolio include:
One of the biggest benefits of adding another rental property to your portfolio is the additional income. The more rental properties you own, the greater your potential profit will be. If you’ve been successful in your first property investment, you could now be ready to 2x that income with a second property. You may even be able to release equity on the first property to help fund the second.
When your rental property is vacant, it can have a drastic effect on your monthly cashflow. Without a tenant your mortgage payments may even go into arrears if you only own one rental home. Owning multiple rental properties lets you diversify. If one property is vacant, you can continue to collect rent from your other properties.
Repair costs can arise at any time, and can vary greatly depending upon the nature of the repair and the age of the building, and any insurance policies in place. Of course it’s also wise to ensure your rental properties are well maintained, not only for the comfort of your guests, but for health & safety and letting regulations.
Owning multiple rental properties may allow you to lower your repair costs per unit. When buying in bulk it is usually possible to strike up a deal, or get some kind of discount. Speak candidly with the contractors and handymen you’re considering giving the work to, and agree a deal based on the fact you have multiple properties and more and possibly ongoing work for them. This especially work well if the properties are in the same service area. Also any materials you buy in bulk will generally be cheaper.
While juggling multiple properties, keep an eye on expenses such as property taxes and damages. Otherwise, you have to look for loans to cover unanticipated expenses, or deal with sinking property values – which are unlikely in the current climate, but worth considering.
No matter what type of rental property type you choose, it’s essential to know what qualities of that property type are in demand. This includes the size of the unit or home, the number of bedrooms and bathrooms, or possible extras such as a swimming pool or sauna. If choosing holiday homes for rental, pay attention to what potential holiday makers are looking for in a particular area. Check desired locations, amenities, etc. and existing rentals nearby, to make sure your property serves their interest. Matching the property type with the needs of your customer will ensure you have constant occupancy and giving you as much return income as possible.
When seeking out the property for your new rental, consider working with a local estate agent to help you research the area and set up appointments to view potential rental properties. A good estate agent will be able to give you a local’s perspective of the area, including where, in the case of holiday homes to rent, specifically holidaymakers want to stay. An estate agent will also show you how much comparable properties are selling and renting for.
Consider that with more than one rental property it can become increasingly difficult to manage everything yourself, especially if the< properties are far from one another, or your primary residence. A good property management company can handle everything involved with managing the rentals in exchange for monthly payments. Each property management company has a different structure for their fees and services, which could be a flat rate or a percentage of the gross rents. You’ll often pay 8%–12% of your rents, although this could be higher (up to 28%) for holiday home rentals.
Popular ways to make money on holiday home rental properties include Airbnb, VRBO. If you hire a property management company they list the property for you and take care of all services, but you need to add their fee to your costs. Alternatively, you can manage the property yourself and create / manage the listings.
Property investing isn’t as straightforward as it’s often made out to be. In fact, it can be incredibly difficult and knowledge, skill and considerable hard work is usually required to be successful. If you’re still getting your bearings, give it time and hold off on buying that second property. There’s no hurry. However, if your first property has been a success and you’re confident that you understand what’s required you could be ready to purchase your second investment property. It could be the start of you building your very own successful property investment portfolio.
We hope you have found this post on multiple property rental useful. If you require any more advice or guidance, or would like Chartsedge to help you in finding your next rental home to invest in, then Contact us.