Investing in a rental property is a perfect way of securing a good cash flow in the future. Choosing the right property is important to earn significant income from it and to avoid further expenses. Some people fail in real estate investing because they are not able to see potential problems. To avoid this, here are some tips that can help in buying a rental property.
Location is the Key
The location of the property will define the type of tenants it will attract. If you want your property to be rented by higher quality tenants, choose the right location. A house that can offer convenience and comfort will gravitate more potential tenants, even if the price is high. Here are some things to consider when buying real estate with the right location:
o Availability of good schools or universities that provide quality education, in the area
o Its proximity to recreational areas, parks, library, grocery stores and other amenities
o Also, consider if there is a healthcare facility, police station and fire station nearby.
o Means of transportation such as bus, train, airplane etc.
o Location legalities on rental properties in the area. There are some locations that may impose excessive fees for homes that are turned into rental properties.
Cost of Property Tax
Knowing how much the property will cost you in terms of property tax, will help you identify how much money you have to spend for it. Property tax varies from state to state. You can make a research online on the lowest and highest property taxes, or visit the Department of Assessments and Taxation Office in the area. However, if the location is good and the property will attract long-term and good paying tenants, spending for high property tax is not that bad at all.
One of the things to consider is the crime rate in the area. Everyone wants to live in a stress-free and comfortable community. However, no matter how beautiful your rental property is if the location has really high crime rate, there is a low chance of getting tenants that will last long. Safety and security is a big issue to consider. Surely, you want to sleep peacefully at night without worrying about your family’s well-being.
What is the Investment Potential?
Before you buy a property, consider if it has a potential to grow your investment. Check if the property has a rental history. Some properties were vacant for a length of time and this could mean that if you purchase it, it might take you a long time to find tenants who will be interested in the property.
Another, you should know how much the tenants were paying for rent. This will help you know how much you are going to earn monthly. You should also consider the rent cost on neighboring rental properties, to give you a baseline data of the cost of rent in the area.
You should also ask the owner if there are any other expenses incurred in the property in the last year. This will give you an estimate of how much you will be spending to maintain the property in a year.
It is also best to hire a professional to help you assess the house. The worth of service they provide is nothing compared to the loss you will incur if you purchase the wrong property.
Locations with good economy and increasing employment opportunities will attract more people and better tenants. You can search online if the area has high employability rate or if there is an upcoming big company that will open with job vacancies. This means that more people will flock to the area and better business opportunities.
Foresee the Future
You can ask whether there are upcoming plans of establishments, like malls, work opportunities, schools etc. This entails more people and better rental business. However, if there are plans of construction of housing projects that are selling real estate at an affordable price near your property, this could mean competition and lowering of the price of property rent.
Number of For-Rent Properties
If there is a high number of a vacancy in the area, this could mean competition or a decline in a number of renters. Maybe, something happened, like the closure of an establishment that affected its workers, a seasonal decline or bad issue in the community. Whatever the reason is, make sure that you know, to avoid problems in the long run.
Calamities and Natural Disasters
If the location is prone to natural disasters and calamities, this will not attract many people and affect real estate investing in the area. Ask the locals and do your research if the community is often affected by hurricanes, flooding, landslide or earthquakes. Also, paying for extra coverage for a natural disaster on your insurance can take away a large sum of your monthly income.
Usually, a simple type of property, like a condominium or house with two or three bedrooms, is advisable for new investors venturing into a rental business. It is best to choose a sturdy property that will require fewer repairs. Also, check the history of the property, to get an overview of what you are buying. Surely, you don’t want to purchase a house with a bad background. Older properties will also mean more repairs and more expenses on your part.
Cost of the Property
The cost of the property is one of the major things to consider is that buying real estate requires a thorough evaluation. It is best to choose an affordable price, but if the condition of the property requires more repair then this could mean shelling out more money on your part.
There are also companies that help in financing real estate businesses. You can consider applying for assistance if your budget is not enough.
Making a list of potential properties and comparing it will help you find the best that will suit your needs. Some properties may be expensive but low maintenance, while others are cheap but the cost of repair is expensive. So you have to weight your options. Still, if you find it hard to make a decision, hiring a professional will help you see things clearly.