Looking to purchase a residential rental property? The idea can be daunting for a first-time investor- real estate is a tough business, and the field is peppered with landmines that can cut your returns. Before getting started, you’ll want to make sure you understand what makes for a profitable property- and what doesn’t.
Here are some of the top features of the best rental properties:
Varying widely across your target area, property taxes will play a major role in your takeaway profit. The municipality’s assessment office will have the tax information on file, and you can also talk with homeowners in the community to get a better idea of how much you’d be paying.
The neighborhood in which you buy will ultimately determine the types of tenants you attract, as well as the vacancy rate. Buying near a university will undoubtedly result in an influx of students and difficulty filling vacancies in the summer, as an example.
No one wants to live next door to a hot spot for criminal goings-on. The area’s local police and public library should have accurate, up-to-date crime statistics for different neighborhoods. Focus on vandalism, serious crimes, and petty crimes, as well as whether crime rates are increasing or decreasing.
Growing employment opportunities in a neighborhood will inevitably attract more tenants. Check with the U.S. Bureau of Labor Statistics to find out how an area rates for job availability.
Rental income will be your bread and butter, so you’ll need to know what the average area rents are. Any property you buy should be able to bear enough rent to cover your mortgage payment, taxes, and other expenses. Research the area well enough so you’ll know where it’s headed in five years.