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7 Things to Look For When Buying a Rental Property

Written by Posted On Tuesday, 02 January 2018 14:44

Rental properties can be an excellent source of additional income, but they are also a big investment. Keeping up with maintenance, hunting for tenants, and following the latest market trends can be a drain on both finances and time. You can look for certain things, though, when choosing a rental property to maximize your investment and minimize the drain.

 

Whether you’re a seasoned investor or buying your first property, here are seven things to look out for.

 

1. The School District

 

If you intend to rent to families, pay close attention to the school district your potential properties fall into. Many families won’t live in an area with bad schools, regardless of how nice the house is or how good of a deal they can get. On the flip side, families may also be willing to pay more to get in the best schools, so you can use that to your advantage in marketing and pricing.

 

2. The Surrounding Properties

 

The property surrounding your rental home can have a profound impact on desirability and price. Close proximity to upscale shopping, movie theaters, and public transportation can also make a property more desirable. On the flip side, this proximity will likely impact your purchase price, so be aware of that.

 

Additionally, close proximity to certain types of property, like foreclosures, power plants, and billboards, can actually have a negative impact on the value of residential property. The takeaway? Make sure to do plenty of research into the surrounding area when hunting for a rental property.

 

3. The Condition of the Home

 

Try to avoid fixer-uppers, at least in the beginning. While it’s possible to get a good deal, it’s also possible to get burned badly on the cost of maintenance and repairs. If you absolutely must go for a fixer-upper, just make sure you know what you’re getting yourself into.

 

If you end up going for a home that needs some work, you can go about it in a few ways—employing a property manager, hiring contractors on an as-needed basis, or doing it yourself. Obviously the DIY approach is cheapest, but you also have to consider the value of your time and what will keep your tenant happy and in the home.

 

5. The Age of the Property

 

Newer properties have two advantages: they can command higher prices from tenants and they tend to require less maintenance. The latter is especially important—it’s common for landlords to underestimate the cost of regular maintenance on a property if the home is older. It’s easy to think you’re doing well when, in fact, the cost of repairs is pushing your investment into the negative each month. When it comes to maintenance, the golden rule is to take care of problems as soon as possible—waiting can give a small, quick fix time to turn into a major (and costly) repair.

 

6. The Neighborhood

 

Like school districts, the neighborhood (and surrounding neighborhoods) of a property can have a big impact on both demand and how much rent you can charge. Amenities like a pool or playground can make a difference, as can the neighborhood’s sense of community. The community in the neighborhood can also affect how safe and secure a renter may feel in your property. To make sure you’re tenants feel safe, consider properties that have home security or installing a home security system of your own.

 

Keep in mind that good neighborhoods generally attract good tenants. Long-term success as a landlord often means attracting the right type of tenant. You want someone that will care for the home as if it were their own. Anyone who has been renting out properties for a while likely has some horror stories about bad tenants.

 

7. The Price Relative to Market Value

 

Ideally, to get the most out of your investment, you want to purchase a property that is priced below market value—maybe something that’s been on the market for a while and hasn’t generated much interest, so the sellers dropped the price. You can then rent it at (or above) market value and make a tidy profit. Always keep your eye out for older listings and houses that are priced to sell. Just make sure not to rush any inspections in case there’s a reason the property is so cheap!

 

Real estate can be a very rewarding investment, but it’s important to go in prepared. These tips should serve as a guide for choosing a good property and maximizing your investment. If you have any other ideas or feel we missed anything, leave a comment and let us know.

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Allie Shaw

Allie Shaw graduated from the University of Utah in communications and public relations. She is an expert in all things real estate and technology.

allieshaw.contently.com/
More in this category: > Curb Appeal: 5 Steps to Improve Your Home's Exterior Value Top Five Real Estate Trends To Look Out For In 2018 As A First-Time Home Buyer
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