Any residence with two or more units in the same building is referred to as a multi-family property or multi-dwelling unit (MDU). This kind of home comes in various structures, including the,
Here Is How To Buy Your Second Home And Rent The First
Dated: July 16 2020
Contrary to popular opinion, purchasing a second home and renting the first is not difficult. You only have to push the right buttons at the perfect time.
How? Let’s find out together!
Step 1 – Remortgaging.
With the continuous rise in home prices, investment property financing options are becoming increasingly scarce. This has forced real estate investors to consider remortgaging as a means of financing their second home purchase. Mortgage, as many real estate investors will describe it, is a serious debt. That said, you can leverage remortgaging the right way to buy a second home and rent the first. Remortgaging simply means transferring your mortgage from one lender to another. Two situations may warrant the use of remortgaging as a finance option for your second home. The first situation is when you record an increase in your (first) home’s value. Once your real estate property increases in value after securing your first mortgage, you enter into a lower loan-to-value ratio. Remortgaging, in this case, will give you more loan money for the present value of your home. The second situation is when you cannot get your lender to give you more money. When this happens, remortgage to another lender to get the money you need for the purchase, at even lower rates. You can use this money to expand your real estate investment business.
Step 2 – Buying your second home.
Now that you have the financial strength, the next step is to buy your second home. But this is somewhat technical, considering that you have to rent your first home while buying the second home. That said, it is not impossible! Check the various type of real estate properties to see which suits you the most. While at it, prioritize the location of the property, after all, you will be the occupant. Here is some heads up concerning the purchase of an investment property: Work with a real estate agent – You may ignore this if you are a professional real estate investor. Otherwise, you need the professional help and guidance of an expert real estate agent to avoid mistakes and make things faster. The agent will scout for the best investment properties for you, according to your preferences. If there are incoming properties, they will know and keep you in the loop. Doing this all by yourself can be draining and slow. Hire a home inspector – The importance of a proper home inspection in the home buying process cannot be overemphasized. Property sellers are known for hiding serious property problems from potential buyers to keep the price high. You can uncover such issues with the help of a home inspector. Alternatively, you may not hire one if you can do a thorough check and explore the property on your own. Doing these will ensure that you do not overpay for a property or end up buying the wrong property.
Step 3 – Convert your first home into a rental property.
Now that you have bought your second home, it is time to transform the first one into a rental property. As an investor interested in making profits, you must decide on which real estate investment strategy works best for you. The best option here is to become a landlord because it guarantees a regular income. But this is not all; you need to decide on the rental strategy to use when leasing your first home. You have two options: (i) the Short-Term Rental Strategy, and (ii) the Traditional Rental Strategy.
Let’s take a closer look at them.
The Short-Term Rental Strategy involves turning your property into a short-term rental, for instance, an Airbnb rental. This rental strategy guarantees higher rental income, and which is chargeable per night. That said, this will only work in areas where Airbnb rentals are in high demand. Plus, you are expected to keep your property in the best possible shape at all times.
The Traditional Rental Strategy will be the ideal strategy if you want long-term occupancy for your property. This means you will only admit tenants that can rent the property for a long time. The huge advantage of this strategy is that you can outsource your role as the landlord to a reputable property management firm. The firm will handle the whole process for you, including the screening and admission of the tenants.
Lastly, the traditional rental strategy guarantees you a constant flow of rental income as the landlord. So, there you have it – the failsafe plan to buy your second home and rent your first as a real estate investor. It is that simple!
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