Quality Rental Property
Not every rental property is one that can be turned into a cash cow. In fact, there are several features of a quality rental property that needs to be in-place before you consider purchasing it. After all, even if you create a showcase of fine living at low, affordable rental prices, it may not draw a single tenant because of other factors.
Here are four things you should look for in a potential rental property before you buy it. The goal is to buy a property that will have potential tenants flocking to rent it.
Location, Location, Location
What is so important for purchasing a home applies to rental properties as well. Once you have located a rental property for sale, the first step should be to examine the neighborhood and surrounding community. In this case, you need to think like a tenant and see if the location meets the following qualifications;
- Easy highway access
- Low crime neighborhood
- Good schools if you plan on renting to families with children
- Good demographics
The more desirable the neighborhood is for tenants living there, the more likely you are to rent the property. This helps with reducing vacancies and lowering the turnover rates.
Expenses
There is the cost of purchasing the property, but there are also expenses involved as well that you need to consider. This means the property taxes, insurance, average maintenance or repair per month, and other factors that play a role in your monthly expenses which will be subtracted from the payments made from renters. Also, consider the local weather conditions during the year as snow removal can be a considerable expense. If after all your expenses the rent you charge still provides a substantial profit, then you should consider purchasing the property.
Your Competition
If there are several other rental properties in the area, then you will need to consider how much your competition may charge in comparison to your rent. This means that small improvements you make to the property will probably not justify in the eyes of potential tenants a substantial increase in rent. You will need to see what other, similar properties in the neighborhood are renting for to have a good idea of what you can charge. Plus, if there are several properties close together with vacancies, that means the one you purchase might have trouble getting tenants as well.
Economy
You can learn more about the local economy by examining the demographics of the neighborhood with the rental property. If the economy is on the rise and new jobs being filled regularly, then you should be in good shape if the area is booming. However, there are other factors such as the quality of the school system, crime rate, and if a large employer is either coming to or leaving the area. Unemployment rates are something to look at as well, we only purchase homes in areas with less than 19% unemployment.
By taking all the indications into account, you can make a proper evaluation of a quality rental property. This is valuable information you can use to know whether making a purchase is the right decision.