A buy to let property is one that you purchase with the intention of renting it out to tenants. So, rather than moving into a house that you purchase, you use it instead to operate as a landlord. This property’s rent will be additional income for you, but you’ll need to manage it and make sure that the house and the land are properly cared for and kept in the best condition, which can be tough.
Considering all of this, is investing in a buy to let property, and getting a mortgage loan Minnesota, a good idea? Keep reading for a few tips.
Can You Actually Afford the Mortgage?
Home prices are quite high, particularly in desirable cities and states, so you need to have plenty of money saved up in order to make a sizeable down payment on any property that you’re thinking about purchasing. In this way, your mortgage rate each month will be lower and more affordable, and the rent that you’ll end up charging will likely cover the mortgage payments.
If you don’t have a large enough down payment and you end up with a high monthly mortgage rate, you’ll have to charge a lot more in rent, and this could dissuade people from renting out your house, resulting in you having to carry the mortgage yourself. And if you decide to rent it out at a rate lower than what your mortgage payments are, you will need to pay for the balance each month.
Property Taxes Will Go Up
In addition to covering your mortgage on your property, you will need to charge enough rent in order to cover the property taxes on the home. You likely will not be eligible for special tax breaks because this is not your primary residence, and your property tax rate could skyrocket from one year to the next.
If you do not properly budget and you are not certain that you can afford a high increase in the property taxes of your rental home, you probably should not invest in a buy to let property after all.
Try to Get the Lowest Mortgage Rate Possible
If you are planning on investing in a buy to let property, keep your credit score as high as possible so that you can qualify for the lowest possible mortgage rate. Also, be smart about where you look for your property. While you certainly want it to be in a desirable location that has plenty of potential tenants searching for places to live, you do not want to go in over your head and opt for a really expensive area that you can’t afford. After all, you can always start small, gain practice as a landlord, and then expand later on.
Now that you know that there are many things to consider when investing in a buy to let property, you can make the right decision for your needs. Just remember that, while a rental property may sound great in theory, actually making the numbers add up could be difficult, so be diligent and prudent.