Investing in rental properties is a great way to build wealth and generate passive income. However, it’s essential to invest in a property that will provide a good return on investment. To do this, landlords and rental agents need to know what to look for in a rental property. These are essential factors to consider when investing in rental properties, based on the perspective of an investor.
What to Look for in a Rental Property:
Neighborhood
Make sure the rental property is in a community with perks for tenants. Do this by paying close attention to the neighborhood. The neighborhood where the property is located is one of the most critical factors to consider. Choosing a safe and desirable location is crucial. The location should have low crime rates, be close to public transportation, and have easy access to essential amenities like supermarkets, hospitals, and parks.
When looking for a rental property, tenants typically prioritize proximity to schools and public transportation. Thus, if a property is competitively priced but located far from these amenities, it may not be worth investing on. The likelihood of this occurring can be decreased by doing preliminary research about the community you’re interested in.
Schools
Good schools are a crucial factor for families with children. Properties located in neighborhoods with highly rated schools tend to have higher demand and longer-term tenants.
Since college students will be seeking nearby rental apartments for the academic school year, nearby local colleges are another thing you should look for.
Amenities
Properties with a lot of amenities tend to attract more tenants, and landlords can charge higher rents for them. Look for properties that have amenities like a swimming pool, gym, laundry facilities, or outdoor spaces.
Low Property Taxes
Low property taxes mean higher returns on investment for landlords. In some states, taxes can vary significantly between neighborhoods, so it’s essential to research the property taxes for the area. However, it’s crucial to remember that tax rates might fluctuate over the year, so even if they were initially modest, they may encounter unexpected price increases. Because of this, you should look for a property with a consistent track record of having inexpensive property taxes.
Average Rents
Renters favor homes that are in their ideal location, have the features they want, and charge reasonable rent. Landlords should research the average rents for the area they plan to invest in. This helps to determine the potential income the property can generate and if tenants would find the rates affordable.
Home Values for Nearby Properties
The value of nearby properties can affect the value of the rental property. Landlords should research the value of properties in the area to determine if the rental property is worth the investment.
You should look at how comparable homes in the community are priced for the amount of square footage they offer, similar to how local rent prices are priced. Based on regional trends in the targeted area, this might assist you in determining whether the asking price for a home is too high or low.
Property History
Before investing in a rental property, landlords should research the property’s history, including any past repairs or maintenance issues. This helps to determine the property’s current condition and potential future repairs and maintenance costs.
Additionally, the history of a property can reveal information such as how frequently it has been listed, how quickly the previous owner put it back on the market, and the total amount of property taxes it has accrued.
You will probably want a property that is in excellent condition and can be rented out by tenants for several years especially if the purpose of this property is to increase your real estate investing portfolio. Before purchasing a home for your rental business, you should be aware of any problems with it if you discover that prior owners have regularly offered it soon after they have bought it.
Demand for Rentals
Landlords should research the demand for rentals in the area before investing. They can do this by checking rental listings online or contacting local rental agencies.
If not many potential tenants are looking for rental properties in the area, this relatively low rental demand can make it challenging to maintain a consistent flow of money from your property.
How to Find a Good Rental Property
There are several ways landlords can find good rental properties to buy. They can search online rental listings, attend real estate auctions, or hire a real estate agent to find properties for them. It’s important to research potential properties thoroughly and conduct a thorough inspection before making an offer.
Marketing your property’s best assets
After purchasing a rental property, landlords and rental agents should market them based on their best features, such as location, amenities, and proximity to public transportation. They can do this by creating a compelling property description and using high-quality photos and videos to showcase the property.
Platforms like Padleads allow you to publish your listing and syndicate it to high-traffic websites, which then helps you quickly find potential tenants.
Investing in rental properties can be a great way to build wealth and generate passive income. However, it’s essential to choose the right property that will provide a good return on investment. By considering factors like the neighborhood, schools, amenities, property taxes, average rents, and property history, landlords can make informed investment decisions and find properties that meet their financial goals.