Looking for a rented property that generates an annual guaranteed income? It’s a good idea, but there are some things to know. If you are thinking to create a portfolio of rented property, here is a brief but useful “check list” of some things that is good to verify before purchasing a rented property, as well as some tips on how minimize risk and maximize your profits. We are here to help you find your way among the various types of rented property available in today’s real estate market. Contact us and we’ll be glad to offer you a free consulting!

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Rented property – In what kind of rented property do you want to invest?

The choice between the various types of rented property is very wide: Offices or entire Office Buildings, Shops in the high streets or entire Shopping Malls, Logistic Parks, Industrial Real Estate, Retirement Homes and Private Clinics, but also Telecom Exchanges, Bank Branches (properties leased to banks), Hotels and Resorts, Tenanted Residential Portfolios, Agricultural Business, Alternative Energy systems that generate a steady income, etc. Another aspect to consider is: do you want to buy a new construction or a historic building?

Rented property – In which area?

Watch out the location: if you invest in the acquisition of an old building in the historic center you will never go wrong. There are some areas, such as the “fashion quadrilateral” in Milan or the area between via Condotti and Piazza di Spagna in Rome, where the real estate value is only expected to grow over the years, and a rented property or commercial property for rent is always very researched. In the unlikely event that the tenant of a shop in Via Montenapoleone were to leave, you can be sure that the property will remain vacant for very few time. The same unfortunately can not be said for a shop of the same square footage located in the suburbs. So, pay attention to the area in which you invest.

Rented property – Which risk profile you are willing to take on?

Regardless of personal taste, even for a rented property must be considered that some areas are a bit more at risk than others. For example, a few years ago buying a bank branch was considered a very safe investment. Today, with many closures of bank branches as a result of mergers or rationalization of the bank counters network, is no longer so, although some assets considered strategic by the banks for their position are still a good investment. Therefore, carefully consider which sector you choose to invest to acquire a rented property.

Rented property – Guarantees on rental fee payment

If you purchase an apartment with the “buy to let” formula, be aware that it is virtually impossible for an individual to be able or willing to issue a bank guarantee to guarantee the regular rental fee payment. Consequently, you have a greater risk of not getting paid if the tenant is in economic difficulties. If you buy an apartment in a holiday resort fully leased to a tour operator who pays with the “empty for full” formula (consisting of a flat rate regardless of the actual percentage of occupation), then you’ll have a guaranteed income. Obviously, if you purchase a a rented property leased to a company, it’s easier to include in the contractual terms a bank guarantee to ensure the regular rental fee payment. Try always to invest in a rented property with guaranteed rental fee payments. Contact us to learn more.

Rented property – Rental fee is indexed?

Protect your income by inflation, with a clause in the contract according to which the rental fee of your rented property revalutes annually. Generally, such contractual clause provides that the annual rental fee increase is equal to 75% of the ISTAT (the National Institute for Statistics).

Rented property – Contractual length

If you purchase a rented property, verifiy that the rental agreement expiration is not too close. In that case, try to negotiate the renewal of the contract before buying the rented property. You can also insert a clause in the preliminary purchase, which will be subject to the lease renewal, otherwise null.

Rented property – Break option

Check even after how many years the tenant of a rented property may execute the “break option” that interrupts the contract, and if they have to pay penalties in this case.

Rented property – Did you already plan an “exit strategy”?

In the investment planning phase for the purchase of a rented property is important that you plan how long you want to keep the rented property, when sell it and at what conditions. The actions you do after purchasing your rented property will affect your profits! Thus, plan them carefully, possibly trying to hypothesize various scenarios and the actions to be taken for each of the rented property acquired. Contact us for details.

Rented property – You make money especially when you buy, not when you sell

Some investors who buy a rented property focus on “how much” the rental income generates, forgetting a simple but essential rule: your final profit will be determined by how good you are in buying. Buy low and sell high! Always follow this rule and you’ll never get wrong.

Rented property – What costs and taxes involves the acquisition of the rented property?

In addition the purchase price of a rented property, don’t forget to calculate also the fees for the notary and any other professionals, such as the real estate agent, architect, etc. In addition, of course, the taxes to be paid by law.

Rented property – Maintenance costs

The rented property has ordinary and extraordinary maintenance costs. Unless you enter into a “Triple Net” rental agreement (whereby ALL maintenance costs are paid by the tenant) generally the ordinary maintenance costs are covered by the tenant, while extraordinary maintenance costs and insurance coverage on rented property, are paid by the rented property owner. Contact us for further information.

Rented property – How much are the other not recoverable expenses?

When calculating your annual return of a rented property keep in mind that, in addition to the extra maintenance costs, you will also have to pay taxes on the rented property, and monthly insurance costs.

Rented property – Never fall in love with the rented property

If you like a rented property or rather, you’re in love with it, then you are in a a risk situation. Strive to be always objective and leave home all emotions. You are considering to invest in a rented property, not to buy the home of your dreams, then you have to be calm and lucid.

Rented property – The Art of Negotiation

To buy well, not only a rented property and commercial real estate, but also luxury house and other trophy assets, it is necessary to apply four simple techniques at the base of each negotiation:
a) never talk about the price as first (whoever speaks first has lost);
b) slow the transaction (a well known technique by professional negotiators);
c) thanks to the technique above mentioned in point b) (slow the transaction) you can take advantage of the time you gained to do a research and get better informed on market prices for similar rented property in that area (if you have didn’t already do it);
d) after making your offer, do a bit of pressure on the seller, letting him know that you are ready to leave the negotiation table if the deal doesn’t satisfy you (this should not be a bluff, but you must be really ready to give up, so be objective and determined).

Rented property – Make debts

The real estate business, especially for rented property and commercial real estate, should be done with the debt, trying to invest as little as possible in equity ( cash). Investing your money nullifies the advantages this type of investment and exposes you at risk. Thus, always try to do leverage, even though we know that today access to bank credit is more complicated than a few years ago. Needless to point out that the financing of a rented property should be self-liquidating, leaving still room for your profit after having covered the costs (insurance and maintenance costs) and property taxes. Contact us for details.

Rented property – Pay attention to cashflow

If you make a business worth millions of euro but your cashflow is always negative this does not make much sense. Obviously, the rented property and commercial real estate generate cashflow the rental income. Today, banks and leasing companies are much more conservative in granting credit but they eagerly finance a rented property which is considered less risky than a house built to be sold. Of course, you must also have an initial capital, which can be created through the sale of other assets which are not strictly necessary (for instance, non rented property that you don’t need). Then, you can use this initial capital to get a loan and purchase a self-liquidating rented property which generates cashflow.

Rented property – Does not exist the real estate deal of your life

The real estate business has always existed and will always exist So, as we have already written, no emotions and be objective. If something does not convince you at 200% go to the next rented property. The world is full of rented property and commercial real estate!

These are just a few aspects on which pay attention, but the investment in a rented property implies other far more complex checks. Contact us a free consultancy.

Click here to see our Rented Property for Sale and Commercial Real Estate for Rent:

Properties for Sale

Properties for Rent

If you don’t find what you need, contact us and we’ll make a targeted search according to your needs.