Buying a second home while letting a first one has been a good way to start building a real estate investment portfolio.
Some millennials in their 30s are reaching a stage where they are ready to move on to their second home, but deciding whether to sell or let their first property is often a tough consideration, research has shown.
Greg Harris, chief executive of Chas Everitt Property Rentals, says buying a second home while letting a first one has been a good way to start building a real estate investment portfolio.
However, if you do make this choice, you will need advice from a qualified accountant to make sure your taxes are in order, and possibly even enlist the help of professional managing agencies to advertise, let and manage the property.
Other tips Harris gives millennial first-time landlords are:
* Make your property as “rentable” as possible: This market can be very competitive, so your flat or townhouse must make a great first impression – in photographs as well as in person. It should be super-clean, painted in neutral colours and completely decluttered. Other major attractions are modern bathrooms and kitchens, high-end appliances, and loads of storage space.
* Determine your target market: One to three-bedroom homes in security complexes are usually easier to let than large homes because the demand is higher.
* Set the right rental: One of the hardest things to do as a landlord is to determine a rental that is competitive but still profitable. Rental rates vary enormously, even within the same area, depending on the size of the property; the popularity and security of the complex; the proximity of shops, schools and other amenities; levies; insurance costs; and a host of other factors.
* Prepare for the worst: Being a landlord can be difficult. Unexpected repairs, accidental property damage, unpaid rent and finding a new tenant can really set you back financially and take up a lot of your time.
* Don’t complicate your tax situation: Rents received must be declared as part of your income, but you can claim certain expenses as a landlord.
Your best move is to consult your accountant to get the calculations right, and to work out what the capital gains tax implications will be if you decide to sell your rental property at a later stage.