6 Things to Consider Before Investing in Rental Property
Real estate is a good way to boost your investment portfolio. If you make the right investment choices, real estate is an exciting option. Finding investment property can be a major challenge for new investors. Here are six things new investors should consider.
1. Talk to a Professional
Prior to starting your search, talk to a professional realtor. They can give you insight into what to expect in the area where you are searching. Doing research can help you identify key characteristics customers in your area want, including the size of the property they're looking for, the location, and any amenities.
2. Think About the Neighborhood
The neighborhood where you buy an investment property will determine the type of tenants you get and your vacancy rate. For example, if you buy rental property near a university, you will likely have a lot of students as tenants. It may be difficult to fill vacancies during the summer.
3. Property Tax
Property tax differs from state to state and from municipality to municipality. Before settling on a property, find out how much you will need to pay annually on property taxes. High property taxes are not always a negative thing if the property is in a neighborhood where you can rent it for a sufficient price and get long-term tenants. Stay away from unappealing locations that have exorbitantly high taxes.
4. Are There Good Schools in the Area?
Good schools attract education-orientated families. If you are renting out family homes, finding those that are close to a school may increase the amount you can charge for rent. Being close to an excellent school can positively affect the rental property value. While your immediate concern is how much you can rent the property for monthly, purchasing a property that is close to a school can increase its resale value.
5. Crime Rates
People want to live where it is safe. They avoid criminal hotspots. The trade-off for renting in a high crime area is paying lower rent. If the property you are renting is in a high crime area, you risk vandalism. Before purchasing a property, check with the local police department and library to get crime statistics for the area. See if criminal activity is rising or if it is decreasing. Talk to the neighbors about the frequency of police presence in the neighborhood.
People want to live next to parks, movie theaters, public transportation lines, malls, and grocery stores. These are perks that will attract quality renters. The city’s website should have information about the area to let you know what amenities are available. It is a good idea to drive around the city for yourself to get a feel for what amenities are nearby.
For most beginning investors, a good property is a single-family dwelling or condominium. A single-family home typically attracts long-term renters. Keep your expectations realistic. You will feel more comfortable getting into real estate rental if your own finances are healthy enough that you can sit on a property without it generating cash immediately.