If you’re interested in rental property, there are a few things to consider that are different from purchasing a standard home. First, you need to remember that owning a rental property is akin to owning a small business – the business being you renting out your property to your customer, the renter. As such, there are many differences to consider when purchasing a rental property versus purchasing your personal home.
The first big difference is the mortgage. With a traditional home purchase, you would use a normal mortgage calculator to figure out what your monthly mortgage payments would be. You enter your personal income and expenses, and the bank will figure out how much you can actually afford.
With a rental property, it works slightly different. The reason is that rental properties require buy to let mortgages, not traditional ones. Buy to let mortgages are designed for rental properties, and they have different standards than a traditional personal mortgage. The biggest difference is how affordability is calculated. For a buy to let mortgage, the bank looks at the income generated from the property to decide how much to lend, not on the buyers financial history. Banks sometimes also require a lease to already be signed prior to making a decision, since it shows what the actual rent received will be.
A second big difference between personal home ownership and rental property ownership is the type of insurance you will need. With a personal home, you usually get a comprehensive policy that covers the structure, your personal possessions, and even usually includes some type of personal liability coverage.
With a rental property, you don’t need all of those things. Instead, you only need what is known as a fire policy. While it from more than just fire, it only insures the building itself, and doesn’t insure any personal possessions or offer liability coverage. Many landlords also get an umbrella policy to cover liability just in case. Remember, it is the tenants responsibility to get renters insurance to cover their own personal possessions.
This is a featured post on behalf of Emortgage Calculator.
Article publié pour la première fois le 10/03/2012