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Guide: Buying A Home For Rental Income

27th October, 2023
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buy a home for rental income

A quick step-by-step guide when looking at buying a home for rental income purposes!

If you are after generating a passive income and building your wealth over time, then buying a home to rent out in Malta or Gozo is a great way to go about it. As Malta’s property experts, we advise you to do your homework and to understand the possible risks involved…after all, it is a big financial commitment and needs to be properly planned.

Here is our short step-by-step guide on how to go about it:

  1. Set goals

Ask yourself what you hope to achieve by investing in or purchasing a rental property. Do you merely want to diversify your investment portfolio or do you want to build wealth? Or is it about generating some extra income? Once you have a clear answer, develop a clearly defined plan to make this happen.

  1. Do your homework and get as much information as you can on the subject

If you know in which area you want to invest, find out as much as you can about trends for that location. This includes vacancy rates, specific property values that apply to the specific property type and size you are looking at buying and lastly of course the rental rates achieved for the type of property for that area.

buy a home for rental income

3. Do what savvy investors do and get pre-approved for a mortgage

Not many people make use of this bargaining power! Not only will it give you an idea of how much your monthly instalments will be and how much you qualify to borrow, having a pre-approval letter in hand when you make offers on properties will pave the way for negotiating a better purchasing price and show the seller that you are serious.

4. Find the perfect property

Fathom in factors such as price, location, condition and also zoning or whether the property will be suitable to rent out. The Malta Housing Authority is quite strict about their rules of what can and what can’t be rented out, especially if you are a foreign resident. Properties in Special Designated Areas can be rented out immediately, given they are registered with the Housing Authority.

5. Put in an offer on the property

Be prepared to negotiate on price and terms once you have found the right property. This is where it would be in your best interest to work with an experienced estate agent to do the haggling on your behalf, as they are experts at it and will get you the best deal.

6. Close the deal

After your offer has been accepted, you will have to engage the services of a notary to close the deal. The notary will complete all of the legal documents in conjunction with your estate agent’s contribution of necessary paperwork and you will have to sign everything, some along with the seller and you will have to pay some if not all of the costs. Usually you will have to first sign a Promise of Sale and pay a 10% deposit. The rest of the outstanding amount must be paid on transfer of the property into your name or what is known as the final signing of the Deed of Transfer. The agent’s commission will be paid by the seller.

7. Start preparing the property for renting out

Upon the moment that you become the rightful owner of the property, you can start making repairs, clean the property and furnish it.

buy a home for rental income

8. Register the property as a rental

You have to register the property as a rental with the Malta Housing Authority. Without this step, it is illegal to rent the property out. A good rentals agent can do this for you in a jiffy.

9. Start the process of finding suitable tenants

Once you have confirmation that your property has been registered, you will have to advertise it as for rent. Online is the best way to go, but if you want even quicker results and find a prequalified tenant, get a reputable rentals agent to do all the advertising for you. An agent will not only find the best tenants, they will do background checks and also take care of showing the property to suitable tenants at hours when you cannot. The agent will also handle all the paperwork on your behalf such as drawing up the tenant agreement or rental contract and make sure all deposits are paid and recorded.

10. Hands-on manage the property

After you have secured the right tenants, you will have to manage the property. This will include collecting the rent on time, dealing with any of the tenant’s issues and responding timeously to any maintenance issues or requests the tenant may have. Again, think of appointing a managing rentals agent to do all this for you so you can pursue other interests instead of being busy with managing tenants yourself.

11. Keep meticulous records

Make sure you keep up-to-date records of all income and expenses related to a rental property. It will assist you with tracking your profitability and also be invaluable when it comes to paying taxes on your rental income, which is usually around 18%.

12. Some useful links on our website:

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