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Important questions to ask before investing in a rental property

23 November , 2017 320

  1. What is the rental yield?

Rental yield is a very important factor to consider when seeking to invest in the real estate market as it can help determine the potential value and return of an investment property. For our purpose, rental yields are calculated as:

 Net rental yield = [(Annual rental income – Annual expenses) / Total property cost] x 100.

It is important to note however that the rental yield only serves as an indicator and not necessarily the exact percentage of return that can be expected.

  1. What is next door?

It is important to know who your potential neighbours are before you invest in any property. Any good real estate agent will let you know about any neighbours that could be a potential issue for you, but it also doesn’t hurt to ask. You should always find out about any organizations in the area that may bring noise or traffic to you or your immediate surroundings, such as bars, schools, and factories.

  1. How safe and secure is the property?

The safety and security of your property should be of paramount concern to you. Important factors to consider are the type of materials used in construction, earthquake proof technologies, escape routes, modern and digital security features such as cameras or key card access to communal areas, and the presence of security personnel.

  1. What social amenities and health facilities are on the compound or nearby?

Is there a park nearby for the kids to play or to walk the dog? How far is the nearest hospital? Is there a gym or pool in the facility? Does the property have a well-maintained garden? These are some examples of questions you should ask about social amenities and health facilities that can add value to a property.

  1. What is the lease period remaining on the property?

A Lease is “a contract by which one party conveys land, property, services, etc. to another for a specified time, usually in return for a periodic payment.” You do not want to end up unknowingly investing in a property which has a lease period about to come to an end. This may result in you spending valuable time in legal battles, or worse yet, losing the property. It is a good idea to ask to see the legal documents on the land before making a purchase.

 

You should never rush a real estate investment decision. Be sure to consult with industry experts and consider the advice you are given before closing the deal.