Do you know what to look for in rental property? It is an essential question in the mind of every investor. Undoubtedly, investment in properties may be rewarding and exciting. Try to choose the best property to increase your rewards and return on investment.
Real estate may be a tricky business. Different land mines in this field can decrease your return. For this reason, it is essential to perform a detailed research. Here are 10 smart ideas on what to look for in a rental property.
- 1 What to look for in rental property – identify your goals
- 2 2. Advice from Landlords
- 3 3. Property Taxes
- 4 4. Neighborhood
- 5 5. Profitable Market for Rentals
- 6 6. Understand Landscaping
- 7 7. Save Money from Down Payment
- 8 8. Understand the Expenses of Rental Property
- 9 9. Research Rental Markets
- 10 10. Home Inspection
What to look for in rental property – identify your goals
Before investing in rental property, you have to understand your final objectives. Your goal should base on accurate expectations and financial capabilities. These things prove helpful in the selection of an investment strategy and what to look for in rental property. Here are some critical questions to answer:
- What are your retirement plans?
- Do you have sufficient money for your expenses?
- What are your income sources after retirement?
- Do you have money to invest in rental properties?
- Do you want instant cash flow?
- Do you want to diversify your portfolio to maximize return, decrease taxes, and risk?
After answering these questions, you will be able to understand your end goals and what to look for in rental property. Moreover, it may be easy for you to pick an investment strategy.
2. Advice from Landlords
If you are new in this industry, feel free to get advice from other landlords. You can get advice from a person investing in a similar area. When consulting another landlord, you have to consider their investment bias.
Investment bias means experiences of a landlord, purchasing strategy, and end goals. You may find investors with the same goals.
3. Property Taxes
Property taxes may vary across the world. You have to learn about them before investing. High taxes may not be a worse thing if you have an excellent neighborhood. In numerous cases, you can attract long-term tenants.
Avoid investment in unappealing locations with high taxes. The assessments from the municipality office may have complete information. You should not invest in a town with financial distress.
The neighborhood is an important consideration to find out the best type of tenants and vacancy rates. By investing near a university, you will get students as potential tenants. In this situation, you have to struggle each summer to fill available vacancies.
5. Profitable Market for Rentals
It is an essential factor to consider before investing in rental property. As a general rule, your rental properties must rent for almost 1% of the purchase price each month. Make sure to study current rental trends in an area.
6. Understand Landscaping
Simple landscaping is an essential factor to consider when investing in a rental property. Select a property with simple landscaping to decrease maintenance requirements. You can’t expect your renters to plant flowers.
7. Save Money from Down Payment
If you are exploring the best options for investment, you have to consider down payment. Calculate the total amount of money you can save for down payment. In an ideal situation, you may be able to save almost 20% to 30% down payment. Here are some ideas to save money for your down payment.
- Pay off current debt.
- Set up your savings deposit.
- Decrease your rent.
- Drastically decrease unnecessary living expenditure.
- Start a second job.
8. Understand the Expenses of Rental Property
Each rental property can be different; therefore, calculate potential income from a property. It may involve unexpected expenses. Some possible expenses may include taxes, unexpected and anticipated repairs, and a fund for a rainy day.
Remember, property taxes may be high in a few states as compared to others. Moreover, you will need some money for emergency repairs.
9. Research Rental Markets
Research is a significant factor in finding a substantial market for investment. You have to evaluate a rental market based on different factors. Some prevalent factors are population growth, job growth, and city revitalization.
10. Home Inspection
It may cost between $300 and $500, but worth your time and money. The inspection will help you to highlight red flags. You can learn about unresolved problems and expensive repairs. Remember, results of home inspections may be useful for the negotiation stages of a purchase. Sometimes, you will be able to ask for a reduction in price. Undoubtedly, inspection is an essential process to determine your monetary rewards and possible risks.