Dear Heather,

I have some cash on deposit, but it is not making very much interest. I was thinking about buying a property to rent out, what do you think?

Real Estate Investor

Dear Real Estate Investor,

Undoubtedly this is a good time to buy property, but the criteria for buying a home to rent is slightly different than if you were going to live in it yourself. Buying real estate to rent is increasingly popular among not just longstanding investors, but also those who are new to investment and simply want to get more from their savings than the banks can offer. Choosing an investment property can be exciting, especially for first-time landlords, but it is important to approach the matter with care and avoid getting swept away.

In choosing a property and in preparing it to rent, it is important not to think about it as you would if it were going to be your home. Instead, try and think from the point of view of the average tenant, and make decisions accordingly.

Type of Property

Research what rents well in the local market and think about what kind of tenant you want to attract. A frequent mistake among first-time landlords is buying the kind of “character property” they themselves would like to live in. However, for an investment in a rental property it is much more important to have lower maintenance requirements and the broadest possible appeal. The best properties for this purpose are often the less characterful ones such as new builds, condominiums or city living.

Location is, quite famously, one of the big things to think about when it comes to making a property purchase. Remember the adage: location, location, location. Don’t buy a property in a troubled neighbourhood.

A good location is generally a desirable and popular neighbourhood where curb appeal is evident and homeowners display pride of ownership. Buy a home with a minimum configuration of two bedrooms and two baths.

This is not to say that a one-bathroom property is hard to rent, indeed in Bermuda’s transient society they are very popular. However, currently there is a shortage of three bedroom, two-bathroom inventory, which means you are likely to attract a tenant quite quickly, should you choose to invest in this.

A potential tenant who needs a two-bedroom home might be tempted to pay a little bit more for a three-bedroom home, but a tenant who absolutely needs three or more bedrooms will not rent a two-bedroom house. The best resale value is often found in homes with three or more bedrooms.

Decor and Amenities

One of the most important assets your property can have is space. The more spacious it is, the greater its appeal will be to potential tenants, and the more they will most likely be willing to pay in order to rent it. Spacious homes will also help make a better first impression — and first impressions are all-important when it comes to winning over potential tenants. Air conditioning is a must, and a modern kitchen and bathrooms are more appealing. Appliances should be clean and in good condition.

Speaking of first impressions, it’s often worth changing the colour scheme after purchase with the impression it will make on tenants in mind. While it’s tempting to get creative with decor, you want to cast your net as wide as possible. Go for neutral colours that nobody is likely to object to, and avoid colours that are likely to prove distracting such as anything that is too bright and bold.

If the home is located within a community regulated by a homeowner’s association, ie a condominium, find out if there are restrictions on rentals, either short-term or long-term. The last thing you need or want is to buy a home for the purposes of renting it out only to discover that there are regulations governing rentals.

Also, any property with an ARV of $27,000 or under in Bermuda is subject to rent control, so be sure to make sure all the proper forms have been completed, signed and submitted, to the rent commissioner’s office.

Happy house hunting! There are some very “buyer-friendly” prices in our market place at the moment, particularly in condominiums. A good agent will be able to tell you which of these might be the most rentable.

Heather Chilvers is among Coldwell Banker Bermuda Realty’s leading sales representatives. She has been working in real estate for 25 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332-1793.