If you want to level up your investments from the regular real estate properties to rental properties, then you should equip yourself first with enough knowledge about rental properties and finding the best one. For first-time investors, it can be a bit challenging especially with so many unfortunate and uncontrolled circumstances that can easily affect your investments.
To help you with your rental property search, here is a guide to consider.
Search And Research On Your Own First
Of course, you will need the help of a real estate agent when processing your real estate deal. However, do not rely or leave everything to the agent. Make your own search for potential rental properties and research more. Search first and open your mind to various options before contacting a real estate agent. There are a lot of things to remember when considering your option. There are a lot of potential properties that will interest you but not all of them will be good or appropriate for your investment. Narrowing down your options is necessary.
To narrow down your list of prospective rental properties, here are the top 10 things you should look for:
Neighborhood is a major factor since the quality of the neighborhood your rental property belongs will affect the types of tenants you will receive and the demand. Example is if you choose a property near a university, you will most likely attract students as tenants. Although you will have full rooms during school days, you may also face vacancies during long school vacations like summer.
- Property Taxes
Since you will be investing in a property that can generate income, you should also expect higher taxes. Inquire from the tax assessment office where your potential property belongs so you can estimate your tax and profits in case you go on with your investments.
- Proximity To School
If you target families as tenants, then you should look for the rental properties that are near schools. Families usually give importance to proximity to schools when looking for rental homes and neighborhoods. However, take note that you should not choose to be near just any school. It should be a good school with a good reputation since aside from affecting the decision of your prospective tenant, the quality of school may also affect the value of your property.
- Crime Rate
No one will want to live in a dangerous place or with high criminal rate. When looking for rental properties, inquire from the police about the crime rate in the neighborhood. Ask some people within the neighborhood if there are serious crimes that occurred within their community, noise problems, vandalism, or if there are known criminals living in or near the community. Inquire also if the police are efficient in the area.
Aside from schools, tenancy is also good for rental properties located near the employment areas. You can check the US BLS for the employment statistics in the particular community you are considering and watch out for updates and news involving the neighborhood like opening of new companies within the area. But take note that the employment change may also affect home values and rental prices in surrounding areas. The good part is that where there is employment boost, people also tend to flock in these places, which mean more possible renters.
- Community Or Neighborhood Amenities
As much as possible, look for the properties that are within a good neighborhood or community with complete or many amenities and facilities that can attract tenants. Some of the basic things they look for are nearby malls, retail stores, groceries, gyms, movie theaters, parks, restaurants, and transportation. Look for the rental property that is near or have easy access to these facilities.
- Zoned Areas And Building Permits
The planning department in your municipality usually have complete information about new developments in various communities or areas that have been zoned. Look for the places with a projected growth. These are places where new developments are being planned like malls, businesses, parks, and condos. However, you should also watch out for the developments that may instead cause negative impact to the rental market like a development that caused the elimination of green space. Building of new condos and residential areas nearby may also affect your property since they can become a competition for you.
- Listings And Vacancies
Search the listings of properties in the area. If there are many listed properties, it could be that the neighborhood is not that good or it is a seasonal cycle. Ask yourself if you cope with it.
- Rental Rates
Rent is the main source of profit on your investment. Make sure to inquire about the rental rates in the community and the average rent. If the average rate in the area cannot provide a profit for you when you deduct taxes, mortgage payments, and other expenses, then you should move on to your next prospect.
With a large investment like a rental property, getting insurance is definitely a large factor. Your insurance may depend on the location and the natural disasters in the area. If the neighborhood is prone to flooding, earthquakes or other natural events, then you may have to get extra insurance for that which could eat up a large portion of your rental income. As much as possible look for the area that is not prone to natural disasters to reduce your insurance needs.
Condos And Single Family Homes
In general, look for the rental properties that are in demand to tenants like condos and single-family homes. A lot of renters prefer condominiums because of the low maintenance. The condo association usually handles other maintenance needs within the vicinity so residents will only have to worry about their own units. Since condos are not independent units, rents are usually lower which attract more renters.
Single-family homes on the other hand attract more long-term renters, which usually include couples and families. These renters are usually just starting their life together, families trying a new place, or those employed near the area. These types of renters are usually more financially stable.
There are so many good places where investing in rental properties can be good. The bottom line is to research well, be realistic when it comes to your expectations, and do not compromise your finances just to get the property you desire. Make sure that you can survive while your new investment is just starting since it may take months or even a year to gain ROI.