In the buy for rent market one of the biggest decisions any owner needs to make is where to purchase property with a view to attracting the best return from potential tenants. Different parts of the country, or for that matter of the world, command different prices and these need to be offset against other commercial considerations before finally deciding upon where to invest.
How Much Can Renters Afford to Pay?
It is said that as a general rule of thumb renters should set aside around thirty percent of their monthly income for the payment of rent. Therefore the return a landlord can expect will be very much influenced by the relative wealth of a neighborhood, with tenants in well-heeled areas willing and able to pay more whilst property in poorer regions will generally need to be made available at a lower price.
In areas of low supply and high demand it may be possible to extract higher rents from local people in spite of there being no corresponding increase in wages. Nevertheless this must necessarily increase the risk of default and so it may be better not to become involved in such a market.
Additional Costs to Tenants
Another consideration when deciding upon where to buy property to let is the propensity of prospective tenants to pay the various ancillary charges that the rental process typically incorporates. As landlord you will usually require a deposit and probably also a month’s rent in advance. Anybody wishing to move into your property will need to consider this, and to balance it against monies set aside for everyday needs such as food and utilities. No matter what the relationship between supply and demand may be, a renter who is struggling to meet everyday out of pocket expenses is a less secure proposition than one to whom money is less of an object.