Rental properties can be a great way to earn some extra money now and well into the future, but trying to find a rental property can be very stressful. It’s important to find the right one so you have a valuable investment property and not a property that will drain you financially. If you’re just getting started in the rental property business, here are three keys you should be looking for prior to investing in any property.
If you were looking for a new home or a commercial location for your business, your real estate agent would stress over and over the importance of choosing the correct location, and rental properties are no different. Choose a location that will appeal to your target tenants—for example, a family home might be harder to rent near a college campus; likewise, you may have trouble finding tenants for a small 1-bedroom in a family neighborhood.
Also pay close attention the area surrounding the property. If it’s in the middle of a part of town with lots of bars and nightclubs, your prospective renters will be different than a property surrounded by parks and playgrounds.
Some investment properties are fixer-upper types, while others are ready to rent from the day you close the loan. Your appetite for (and ability to) put more money into getting it ready to rent or doing the work on your own should be taken into consideration. You may get a better deal on property that will need some improvements, but if you don’t have the time or cash to do those things your investment would be better spent on a property that requires little or no work.
In addition, evaluate when the property might need upgrades, and what those will be. A 30-year-old home or apartment complex that still has the original roof might be in need of a new roof in the very near future, which is a big expense. Ask about how recently things like carpet, flooring, and appliances were installed or updated to get a sense of some of the upcoming expenses and a timeline for when they might occur.
The best way to determine what type of property you should invest in is to think about the ideal tenants (of course, you’ve already determined this to some degree in choosing your location) and evaluating the property from the point of view of someone in that demographic who is looking for a place to live.
For example, if you invest in rental property around a college campus, tenants are more likely to live alone or with roommates. In that case the most valuable property will be either small studio or 1-bedroom apartments, or apartments/homes that have several rooms and separate bathrooms that are accessible without going into someone else’s room. If your target is a retired couple and you’re looking at properties that have the master bedroom on the second floor and family room in the basement, consider how all those stairs might impact tenants who may have trouble with mobility. In that case a main-floor-living property would be a lot easier to rent.
In addition, look at the surrounding property and features. Make sure there is enough parking for all the people who might potentially rent the property, and the proximity to things like recreation, grocery stores, schools, and more.
These are not the only three things to consider when purchasing rental property, but they are a good place to start. Before investing, it’s a good idea to talk to a professional or company with experience in purchasing rental properties to get an expert opinion. Find out more from Americas Housing Alliance today.