Keys to Finding a Quality Rental Property
As a real estate investor, it’s important that you find a quality rental property; however, what exactly makes a property a good candidate for rental purposes? It can certainly be tempting to think that buying a rental property is all about the purchase price, renovation costs, and putting the property up for rent; however, there’s much more that needs to be taken into consideration.
Investing in Rental Property
While a good property that has been properly rehabbed or renovated can certainly play a key role in being able to successfully draw a reliable income from the property; but, it also requires knowing the local market as well as the demographics of the area. If you choose a property in an area that just doesn’t have the demand for that particular type of property, no matter how nice your renovations are, chances are it will hard to find or keep tenants. This can be catastrophic when you’re trying to create an income stream from real estate investing. Some important factors in a quality rental property include the following:
The Local Area
You certainly don’t have to purchase rental property in the most expensive neighborhoods, in fact, this might not be a great idea; however, it is important to make sure that you choose an area that prospective tenants will find desirable. Keep in mind, there’s only so much you can do to make a property something a tenant would be interested in. If the surrounding area is run down, having the nicest house on the block is probably not going to be enough. When evaluating the local area, think like a tenant. See the area through the eyes of the tenants you’ll be marketing to. It’s usually best to pay more and be in a desirable area than it is to get a great deal on real estate in an area where you’ll struggle to find quality tenants.
Area Demographics
It’s important to evaluate local demographics. Look at the economic strength of the area. You can do this by looking at the area’s job market as well as the quality of the local school system. Of course, the crime rate for the area will be another demographic that can make a big difference in whether you’ll be able to attract tenants.
Taxes and Other Expenses
The cost of owning and maintaining the property must be taken into consideration. Of course, you’ll probably have a mortgage payment, but you’ll also have taxes and insurance that must be factored in to your overall costs. Additionally, if you own a property in an area that is in decline, you might see your property taxes increase significantly. Your cash flow must also take into account routine expenses that are normal for the area. This might be snow removal in cold climates or year round lawn care in warmer climates.
Local Competition
The competition in a given area will play a big role in how difficult it will be to find tenants. Look through real estate listings; if there are numerous rental properties available, it might be an indication that the area is already saturated or that there is little demand for rental properties.
A property should never be evaluated on its looks. It’s essential that you view the potential of a property, not its aesthetics. You can make cosmetic changes, but there are some things that you won’t be able to do anything about.