5 Keys To Look For In A Successful Rental Property
No two investment properties are exactly alike. It isn’t possible to purchase just any old property in any location and then expect to start collecting rent monies regularly and right away. Like all other aspects of the real estate industry, rental properties require a few things for assured success. If a rental property doesn’t have each one of these items, it can turn out to be a real lemon. The top rentals are positioned in high-demand areas that are capable of weathering dramatic dips in the local market. These units also have a broad range of helpful amenities along with solid numbers. Even though these things might seem fairly obvious, there are a lot of eager buyers who overlook these key points and who rush to invest in the very first properties listed. If you’re looking to buy real estate and hold it, following are 5 keys to look for in a successful rental property.
A Prime Location. It isn’t necessary to be a seasoned real estate investor to know just how important a good location truly is. Location is by far and wide the most important factor to consider when making one of these purchases. It may be possible to get an amazing deal on a home, but if people don’t want to live in the area, you’re returns will be dismal. In addition to affecting demand, property locations can also impact price and the amount of management that you’ll need to invest in. When considering different locations, be sure to do plenty of research on other local properties. Compare your target properties to other options on the market. People commonly make the mistake of thinking that the amount of work they invest is going to affect rental costs. While it’s definitely good to make improvements, people are not going to pay rent costs that are 15 to 20 percent higher than the current market value. It may be possible to justify higher than average rents if you have a truly desirable location. The right location will have the biggest and most positive impact on your success than anything else on the property.
Numbers. You want to choose a rental property that has strong numbers. Don’t get too caught up in how nice the neighborhood is or the overall property layout. The numbers will tell you what you need to do going forward. When considering cash flow, think beyond tax, mortgage and insurance. You also have to account for property management services, maintenance, vacancies, license fees, utilities, lawn care, and snow removal among other things. If you make the mistake of ignoring or overlooking any of these things, this can have a significant impact on your cash flow and can turn impressive profits into profits that are merely average. While cash flow isn’t the sole benefit of owning investment property, it is among the biggest factors. If you have questions about the numbers, make sure to do your research until you understand and are comfortable with the numbers. You should also reach out to your real estate agent for answers or take a trip to city hall to dig up the info you require.
Property Management. You have to do more than simply find tenants and then hope that the rent gets turned in. Successful properties are always diligently managed. Before beginning your search for an investment property, find out how you intend to manage it. There is no good or bad way to approach management. Some landlords are comfortable managing their buildings themselves while others prefer to use property managers. The the two biggest things to consider when making your choice are cash flow and time. You have to start by determining how much time you’re able to invest in your property. If an unexpected issue arises, will you be able to put everything down to take care of it? If not, using a property manager is going to be your best bet, no matter what the cost may be. Failing to take care of problems in a timely fashion is property neglect and it can also cause building residents to lose faith in you. Your tenants will leave the building as soon as their lease expires and you’ll wind up losing a valuable tenant that may have stayed over the long-term.
Tenants. How strong your tenants are will play an important part in determining your overall success. Although you can never know for sure just what types of tenants to expect, there are a few things that you can rely on as indicators. If you buy a rental property that’s near a university or college, you can expect to have students for tenants. This can lead to higher rents, but it can also make managing the building more complex. If your property is a multi-family complex, then expect to have multiple tenants on your hands. There are some real advantages to having more tenants, but it can also mean receiving lots of calls every time an issue crops up. Before moving ahead with your purchase, you should define a few strategies for finding quality tenants.
Keep The Little Things In Mind. If there are features on the property that you find appealing, prospective tenants will probably like these as well. Sometimes seemingly small things like a washer and dryer in the basement or a dishwasher can really improve the marketability of the unit. Consider how things can be improved in comparison to the way in which they’re currently being used by the seller. A seller might be using the garage for storage, but with diligent cleaning, this could become functional parking. This can be a big plus for those with kids or people who don’t want to scrape down and defrost their vehicles in the winter. A fireplace or a swimming pool can seem important, but many times, having a nice deck is just as good if not better. Rental properties that have quality amenities make people feel at home and they have a much higher likelihood of drawing in good tenants.
You can set yourself up for long-term financial success with the right rental property. With these five keys, you can search for a unit that will bring in phenomenal returns.