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If you’re buying a property specifically for short-term rentals, your purchasing and financing choices can make all the difference to your profit. Not every property is suited to attracting guests for short stays all year round, so don’t buy a property because the price is right and hope the guests will come. Here are three tips for how to make smart decisions from the start.
Figure out your financials
When calculating how much you can borrow, some lenders will consider rental income, but not others.
Before you even begin looking at properties, know what you can afford. It’s not just the price of the property, but all the expenses associated with owning a rental. Council rates, land tax, maintenance, repairs, pest control, strata fees and stamp duty are some of the typical costs. Short term rentals tend to have higher running costs as you will need to account for increased maintenance and frequent cleaning. They may also have higher vacancy rates and seasonal price fluctuations, which will impact your cash flow.
Advice from a trusted and experienced Yellow Brick Road mortgage broker can help you make the best decision about how much to borrow and which loan to choose. There are many options to consider when financing investment properties: whether to use equity from an existing property, take out an interest-only loan or add in features like a line of credit.
When the time arrives to put in a loan application, advice from a broker can boost your chances of approval. We’ll prepare you for what lenders look for, such as savings history, credit score and ‘serviceability‘. When calculating how much you can borrow, some lenders will consider rental income, but not others.
Novice or seasoned investor, we can help
Know your market
What you’re looking for is an area where there is demand but not too much supply.
How would you handle switching between the models of landlord and hospitality provider.