Have you been thinking of buying a rental property in order to generate more cash flow for yourself or your family? Rental properties can be amazing money-making opportunities, but there are many aspects you should consider when choosing a property. Making sure to do your research before a commitment like that can make the difference between a money pit and a lucrative investment.
Think like a potential tenant. Be sure to consider the following when choosing an investment property:
Location: Possible tenants will pay attention to the neighborhood, the crime rate and the school system where your rental property is located. Ask the locals or head to the police station so you can get a good feel for the crime statistics in the area. Researching how well the schools are rated is important, too. Look out for possible employment opportunities in the community as well. If your potential property is in the medical district, for instance, there will probably always be a plethora of jobs available. Likewise, if a large corporation, such as a car assembly plant, is in the area, that will also create jobs.
Another thing to consider with the location is the local amenities. Restaurants, movie theaters, gyms, shopping centers, parks or local public pools are all things that tenants may be looking for.
Property taxes and rent in the area: How much are other landlords charging for rent in the area? Use this as a guide for a ballpark of how much you should be charging. If you’re overcharging, then you’re unlikely to find tenants who will be willing to pay the rate. If you’re not charging enough, then you’re not making the profit that you could be.
What about property taxes? They’re certainly something to consider when evaluating how much profit you’ll be making. Knowing how much you’ll be losing to taxes is crucial when deciding how much rent to charge.
Amount of work involved: Is the home you’re considering buying move-in ready, or does it need work? Deciding whether or not you’re okay with a fixer-upper is an important element. If you’re unable to put in the work that a slightly older property may need (such as painting or replacing floors) or you cannot afford to pay someone to do the work, you may be paying a little more for a newer and more ready property.
Supply and demand: If there is a high number of rental properties currently on the market in the area in which you’re looking, you may not be able to charge as much as you’re wanting to for your property. If there are only a few, it may mean that others have gotten snatched up quickly, because there are a lot of people searching in that area. You should look for an area where you won’t have to wait long to find a good tenant.
Looking for some help getting started? Please contact us today – we’re happy to go over your financing options with you!