So you’re thinking of investing in real estate! Owning a long-term rental property is one of the biggest and greatest investments you can make. Unlike many other financial investments, it’s stable and comes with a ton of benefits. Owning a long-term rental property allows you to generate a passive income but choosing to buy an investment property also comes with a lot of questions. What makes a good rental property? What type of property is best? What should I consider before making an offer? Is there such thing as a bad rental? When it comes to evaluating if a property will make a good rental investment, here are a few things to consider!
Location, Location, Location!
The golden rule of anything real estate-related is location. It’s cliché, but true. A property’s location can determine how much you can charge for rent, how long it will stay on the market, and the quality of renter you’ll attract. Do your research on the city, neighborhood, and local attractions when looking at a potential investment property. How many other rentals are in the area? Is it a popular neighborhood? Is it close to major highways? All of these things and more are important to look into when considering purchasing a rental property.
Numbers are important. The price of the potential investment property, the cost to maintain it, and the rate of return you’ll receive should all be considered carefully. If you’re looking at a bargain property, ask yourself why it’s priced so low. Is it going to cost an arm and a leg in maintenance costs? Can you realistically rent the property at a rate high enough to not only cover the monthly costs, but to make a profit as well? Don’t forget you’ll have to pay the mortgage whether you have a tenant or not, so be sure the number isn’t too high that you can’t afford it at every point in the rental cycle.
Maintenance costs are often the bane of rental property owners. The goal is to make money, right? Not spend it all on fixing broken appliances, maintenance emergencies, and more. While maintenance costs will come up eventually, look for a property that’s in good shape and doesn’t need a ton of work. Remember, too, that most renters also want something that’s easy to maintain. They don’t want something that needs a new fix every month or something that’s difficult to keep up. Try and find a happy medium and go from there!
Normal or Unique?
You want your rental property to stand out over the competition, but sometimes unique can be a turn off. When it comes to choosing a rental property, you want something normal. Stay away from properties that have awkward layouts or weird features. Put yourself in a renter’s shoes. Do you want an average home with an open, inviting floor plan or an updated house that’s cramped and only has one bathroom? Look for practical, like a single-family home with 3 bedrooms, 2 bathrooms, and a normal layout. The Downtown condo with the water-fall tub in the middle of the bedroom may look cool, but you may find yourself waiting a long time for the right renter.
The key to profiting off of real estate is to buy and hold. But choosing what to buy and hold makes a world of difference. Look for something in a popular location, that makes sense numbers-wise, is easy to maintain, and doesn’t have any off-putting features that will make it difficult to rent.