A start to finish guide to investing in a property to let
Buying property for rent has been a popular investment vehicle for the past fifty years. And that is with good reason – it’s a great way to make a passive income, which is a way of earning money without having to put in the hours. So, if it has been on your mind for a while, what factors should you consider before you take the plunge into real estate in Malta? And how do you get ready to receive your first tenants? Read on to see why so many people do it and what it entails.
Know the market.
If you’re interested in renting out a property, the first step is to think about the market. All kinds of homes are sought after for rent. In Malta, however, the most in-demand properties are apartments and maisonettes for long lets together with apartments, villas and farmhouses for short lets. If you are in possession of any of the above and wish to rent it out, you’re in luck – you’re one step closer to renting.
But what if you don’t have the property yet? Then that means that you can choose the locality you invest in. Different localities are popular with people for different reasons. Sliema and St Julian’s are popular with tourists and are among the first towns people search for when they intend to move to Malta. St Paul’s Bay, while being a coastal town, is more affordable than the former two, and Msida is close to the hospital and university and is popular with hospital staff and students. But that’s not all. A lot of people working in Msida’s environs choose to live there. Mosta, San Gwann and Swieqi are very residential and although quieter, they still have the advantage of being a short commute from the main industrial hubs. This makes them popular with locals and expats alike.
Naturally buying a property in a sought-after area does not come cheap. One way of affording a property there is to buy the worst place in the best neighbourhood and invest your time and money into renovating it. The return will be worth your while.
Alternatively, you can look to the future and look at other towns or villages where the population may be ageing but which have the potential to become popular in the coming years. As more homes in these locations become vacant, house prices may be more affordable making them a more attractive investment.
Financing the property
Once you have set your eyes on a property you like, you may wish to get in touch with a letting specialist from our team to discuss whether it is a sound investment. They will give you a clear indication of renting rates in that area.
Next, you need to decide whether you are going to finance it yourself or get a bank loan. If the latter is the case, going to the bank is the next step. Although it is never too late to invest, the earlier on in your life the better especially as this will allow you a longer mortgage and reduce your monthly repayments. Fix an appointment to find out if the bank can assist you with the investment. Keep in mind that if there are no tenants in your property and the rent is not coming in, the monthly loan repayments to the bank still need to be made.
At the same time, also speak to a notary who can verify that the property you are looking at is free and without any restrictions. Make sure that the proper research is carried out and that information available on the property is up to date.
Getting the property ready
Whether the property is ready to move into or not, there is a very big chance that the property will require some work to make it ready for tenants. There are three ways to go about this, depending of course on your skills and the nature of the work involved.
You can do it yourself to cut costs. This will leave you more money in your pocket and if you have the right skills for the job, you will know that the job has been done well. Of course, doing it yourself requires time.
If time is scarce, you can get a turnkey contractor to take care of the work. A project manager will be on-site to manage the different jobs that need to be done. This also has the advantage of convenience – you deal with one project manager who in turn will deal with the workers and motivate them to do a good job. The downside is, of course, that it does not come cheap.
A third alternative, which if you’re lucky might be the best of all three, is getting self-employed professionals – electricians, plumbers, plasterers, etc – to do the different jobs for you. This can work out in your favour, especially if the person is good at what they do, because you can start building a network of people you can trust and who you can outsource maintenance work to in the future. Start asking family and friends for reliable workmen they trust and recommend. You can also do some minor works in your home in a bid to find reliable ones who you can contract to work in your rental property.
Know your rights and obligations
Maltese laws oversee the renting of property in Malta. A new set of laws have come into force very recently and one should become familiar with them. It specifies that the landlords register the tenancy contract online, whether it’s a short or long lease, or the letting of a shared residential space.
The new law also specifies by how much the rent can be put up and the rights of the landlord if a tenant dishonours the contract. You can read all about it our blog on the Important Rules and Regulations All Landlords Must Know About. Speak to one of our letting specialists to clarify any doubts so that you do things right, straight away.
How much rent?
As explained above, you could check what the rates in your area are by clicking on www.quicklets.com.mt, and see what prices are like for the type of property you wish to invest in. Once you have an idea of what you can charge, you are better placed to decide if investing in a property to let makes sense for you. Do that by also subtracting a monthly or annual amount to allocate to maintenance expenses you might incur (breakages, redecorating, replacing an old piece of furniture), income tax, and loan repayments, if there are any. Do not forget the condominium contribution if the unit you own is in a block of apartments. When all these expenses have been factored in, you should have a good idea of how much profit you could make.
Other things to keep in mind when calculating rent is that short lets mean more expenses as you need to include utility bills in the calculation. The amount and type of tenants staying in your property also makes a difference in the rent you can ask for. The more tenants there are, especially in shared leases, the more the wear on the furniture and the property, meaning you need to replace items and redecorate the place more often.
Welcoming your tenants
The final stage of the whole process is furnishing and decorating the place to welcome the new tenants. Making the property look welcoming does not need to cost an arm and a leg. There are few things that one could keep in mind when shopping, and there are plenty of good value and aesthetically appealing options. Shops nowadays sell a range of homeware in coordinated colours.
Buy coordinated items within one room – it makes the room look well put together. So, for example, curtains should match the colour of the sofa, or get matching bathroom accessories, like soap dispenser, toilet brush and toilet bin. It’s a small, often overlooked aspect which makes a bog difference. Don’t forget to put in a plant, even if an artificial one. Plants make the place look homely.
When you meet the tenants for the first time, be friendly and welcoming, but mean business – lay down the rules in advance and stick to them, like for example no pets allowed. Possessing good negotiation skills helps. Know what you want and be reasonable in your requests, however work towards achieving your goals.
Have a clear idea of what kind of tenants you would like. Would you like families for long lets? Or are you after short term lets where tourists or groups of people stay for a short holiday? Speak to a letting specialist who will help you find the right tenants for you.
Make sure you have enough time and are readily available for your tenants. This doesn’t mean that you must pick up every time the phone rings. However, do return the calls and mention a deadline by when an issue can be resolved. Should you need to go over to the place, suggest a date and time right away, if you can. Always inform the tenants before you visit the property.
If you’re still thinking about it, study the market or discuss it with one of our letting specialists. They will be able to give you insight into where the hotspots are. Do not rule out quieter towns as they might be suitable for people who work in the surrounding area. After all that has been said, find a property which is close to where you live; you don’t want to make it harder to go there, especially in the case of short lets. Invest time in deciding on your rental property to give you the best chance of making a good return.