Regardless of whether you’re a seasoned investor or a novice who is just starting your real estate investment journey, when it comes to rental property investments, the long-term goal is to select properties that will continue to hold occupancy and maintain a steady source of income. Your success or failure in investing depends on your ability to select profitable “cash-flow” properties. Although this might appear to be a daunting task, there are key features or characteristic that you’ll always find in a profitable rental investment.
Here are the top seven characteristics to look for in any potential rental investment property:
- Neighborhood: The neighborhood you select will be the determining factor on the type of tenants your rental property will attract. Select a neighborhood that has consistent housing prices and few empty or unsold houses, is serviced by good schools, is not dependent on a university or other seasonal tourists support, and is not next to multi-unit housing. A neighborhood that fits within these parameters is more likely to attract reliable tenants and support a rental house that wishes to be filled more often than it is vacant.
- Property Taxes: The goal is to make money on your investment, so you want to be aware of the property taxes for any perspective property. Selecting a home that will eat more than 50 percent of your income via property taxes isn’t a wise long-term investment.
- Commutability: Believe it or not, the commutability of a home is one of the top deciding factors for anyone looking to rent. If the potential property is too far from their job, perspective tenants won’t even consider looking at your property, no matter how much potential it has. Do your research to find out what major employers are already in the area or might be coming to the area in the near future. Big employers require a large pool of employees — which means more perspective tenants for your property.
- Local Amenities: Let’s face it, no one wants to live any place where it will take them 20 minutes to drive to the nearest grocery store or restaurant. Drive the area and see for yourself what amenities it offers — how many grocery stores or restaurants are close by; are there near by parks or community pools; are there local events or farmers markets; and are there other venues, such as theatres, malls or gyms near by. Amenities mean convenience and that equates to a more attractive rental opportunity for perspective tenants.
- Future Development Plans: The local municipal planning department will have details on any new developments that are slated for the area. Getting into a great neighborhood with tons of future growth plans is definitely a key for a successful long-term rental investment property.
- Listings and Vacancy Activity: Too many listings or rental vacancies in one area could be a sign of a neighborhood that has “gone bad” or one that is no longer desirable. It would be hard for your rental property to compete in an area that is already saturated by listings —- especially if those listings have been sitting for a lengthy period of time. Also, high rental vacancy rates could potentially require you to drop your rent in order to complete, which will impact your return on your investment and income.
- Curb Appeal: When it comes to real estate, looks matter! When choosing your rental investment, select a home that has curb appeal…one that when a potential tenant drives up to it, it immediately gives them a sense that this is a warm and inviting house. You’ll want a house with landscaping you can maintain, an updated exterior and one with a modern/maintained fence. If potential tenants pull up to a property with a delapitated fence, loose siding and a yard full of weeds, the odds of them stopping and coming inside to take a look will decrease exponentially.
Once you understand the characteristics of a profitable rental investment, you’ll find it will become second nature to choose the best fits for your portfolio when evaluating properties.
Looking to further expand your investment portfolio or take your first steps on your real estate investment journey? Then contact the Simply Do It team and let us assist you in finding the best properties for your portfolio and guide you towards long-term success.