Are you in the market for a residential rental property to enhance your investment portfolio? Investment properties can be highly lucrative, provided you choose them carefully and strategically. With that said, investing in rental real estate can also be daunting for first-time buyers.
There’s no denying that real estate can be a tough industry. The business is full of sub-par properties that can make significant dents in your long-term returns. This is why it’s essential to research your prospects before investing. By doing this, you’ll know exactly what you’re getting into.
To help you out, we’ve outlined 9 important features that every profitable rental property will have.
1. A Good Neighborhood Base
Location, location, location! There are a few factors that will determine your experience as a landlord as much as the neighborhood where your rental property is based. The area you buy in will influence the types of tenants your property attracts and your potential vacancy rates.
If you buy property close to a university, students are likely to dominate your potential tenant pool. You might also battle to find new tenants during the summer. Bear in mind, that some areas discourage rental conversions by charging hefty permit fees.
2. Affordable Property Taxes
The taxes you’ll pay on your property will vary considerably throughout your area of interest. You need to be aware of exactly how much tax you’ll pay if you want to maximize your earnings. Higher property taxes are not always a disadvantage, particularly if your property is in a safe neighborhood that attracts long-term lessees. However, some less appealing areas charge high taxes, and those are best avoided.
Your local municipality can provide you with all the tax information you need, or you could talk to local homeowners to assess their experiences. Additionally, it’s advisable to find out whether or not property tax hikes are likely in the foreseeable future. A town or suburb that’s struggling financially may increase taxes beyond what landlords can realistically charge their tenants.
3. Low Crime Rates
Very few tenants worth keeping will be willing to live in an area filled with criminal activity. Check out the rates of petty and serious crimes in the area you are considering investing in, and if there has been any escalation in recent years. The local police station or public library will be able to assist with this information. If possible, chat with locals in the area for a first-hand perspective too.
It would be wise to ask about police presence and its regularity in the neighborhood too, as well as response times for emergency services.
4. A Thriving Nearby Job Market
Areas with plenty of stable employment opportunities usually attract those tenants who are of working age. You can assess the job availability rates of an area by investigating at the Bureau of Labor Statistics or your local library.
If any notable companies are moving into the area, you can expect that skilled workers in need of places to live will follow. This could inflate or decrease housing prices, depending on the type of business setting up shop. If you would appreciate a specific business moving into your area, it’s safe to assume that your tenants would too.
5. Close Proximity to Reputable Schools
If you plan on investing in a family-friendly rental home, you need to consider the quality and reputability of the schools in the area.
Your primary concern might be monthly cash flow, but the overall value of your property will still feature if you choose to sell. If there are no good schools close by, this may have a negative impact on your investment’s value.
6. Excellent Amenities
Take a tour of the area you’re considering buying a rental property in and check out its amenities. Does it have gyms, parks, theaters, cinemas, restaurants, beaches, public transport links, and other facilities tenants would appreciate?
Properties based close to these facilities will always be in high demand. You can also visit the city hall to find out more about appealing public amenities in the area.
7. Planned Development in the Area
When you see construction, it’s often a good sign. If a neighborhood has been ring-marked for luxury housing, shopping, schooling, or recreational developments, this might bode well for your ability to attract and retain good tenants.
However, you should keep an eye out for developments that could negatively impact the area. Low-income housing, new roads that increase noise pollution, and new high-traffic businesses can all negatively affect a neighborhood. These factors will have a knock-on effect on rental prices and property value. The local municipal planning department can give you more information about plans zoned for your area of interest.
8. Low Maintenance and Renovation Needs
Buying a fixer-upper property with potential may be appealing, but having to fix major structural issues can also take a sizable chunk out of your finances.
It’s advisable to look for a property that will attract high-paying tenants with as few small renovations and cosmetic alterations as possible. If the property already underwent renovations or alterations in the past, they must be up to code and not pose any risks. Additionally, ensure a property is eligible for landlord insurance cover. This insurance can cover a myriad of issues, including the need for renovations after storms, fires, and other events.
9. Sufficient On-Site Parking
No matter where your property is, good tenants will always appreciate being able to park securely on the premises. Keep a lookout for investment properties with on-site parking, or sufficient street parking space at the very least.
Even if your lessees don’t need parking, you can rent out empty parking spaces and further diversify your income streams.
Finding a Profitable Rental Property
Every state, province, and county has good neighborhoods. Every one of those neighborhoods offers prime investment opportunities for those trained to spot them.
You need to do in-depth research to find a rental property that will not only attract and retain trustworthy tenants but keep them safe and satisfied too.
Set realistic expectations, invest in renovations and upgrades, and ensure your finances are in good standing. With the right property in the right location, it won’t be long before your rental will generate a regular income.