Rental properties have the potential to bring steady cash flow and lucrative profits to you as an investor. Choose the wrong property, though, and you’ll be looking at a steady drain on your finances that can put you out of the investment game forever. Knowing what to look for when choosing a rental property to invest in is the key to avoiding this enormous mistake.
Fortunately, there are a few questions you can ask about a given property to reveal its investment potential. While there’s always some risk in the rental property game, knowing what’s an acceptable risk and what’s a foolhardy choice can help you get ahead. The Woodlands Texas property management companies recommend looking for the following features in a property before writing a check.
1. Neighborhood.
If you find a beautiful house for an excellent price, you might think you’ve reached the end of your search for an investment opportunity. However, failing to take into account the location of the property can result in big financial losses. The type of neighborhood your property is in influences what kind of tenants you attract and how often you’ll face vacancies.
A property near a university, for example, will likely have a steady stream of temporary tenants in the form of students. This means you’ll have to deal with filling vacancies often. This may be worth it if you’re able to charge high rent in that neighborhood. Just as often, though, it may mean less hassle and more money to choose a quiet residential neighborhood where you’re likely to get more long-term tenants.
The property you’re looking at shouldn’t be either the nicest or the worst looking house on the block or in the neighborhood. Seek a safe, affordable neighborhood. This will attract tenants looking to stick around a bit longer, and you can charge fair rent everyone can be happy with.
2. Schools.
Whether or not you’re looking to attract families to your property, choosing to invest in a property near a good school is a solid choice. Properties near highly regarded school systems hold on to their value better as the market changes.
You can charge better rent when you choose a property near a good school. You’re also more likely to attract long-term tenants, who want to keep their children in the same school system as they grow up, meaning less hassle for you as a landlord. What’s more, if you eventually decide to sell the property, its location will give it a good value.
3. Jobs.
People want to live close to their work. It saves them money on gas and/or public transit, and also allows them to spend less time and energy on their daily commute. If you choose a property close to employment opportunities, you’re making a wise investment. You’re also attracting tenants with steady employment, meaning you can depend on your rent being paid regularly and in full.
One way to find out if an area has many job opportunities is to visit the U.S. Bureau of Labor Statistics’ website. You may also find this information at the local library. Any news of a big company moving into an area means more jobs and more workers.
4. Local rent prices and vacancies.
Before paying a large amount for a property, you have to make sure you can charge your future tenants a reasonable amount of rent. Your mortgage, maintenance, utilities, and other payments that come with owning a property must be balanced out properly by your rent. This means looking at rent prices in the area you’re thinking of buying in.
One of the most efficient ways to get an idea of rent prices is to check online listings for the area. Determine how much you would have to charge for a property to be a good investment. You can also research how many vacancies are in the area by checking these listings. If there are many vacancies, there’s a lot of competition, and you may have to charge lower rent. On the flip side, fewer vacancies means you can charge a bit more.
5. Condition.
It might seem like a great idea to buy a fixer upper for a low price and then invest in the repair, and in some cases, this is a wise investment. In others, however, you may be biting off more than you can chew. There are a few factors involved when it comes to making this decision. Chances are, any property you buy is going to need a few changes to be suitable to rent. There are laws and codes dictating what kind of property may be rented. Consult a Houston property management company and do some research to learn your area’s zoning codes.
Certain repairs are extremely expensive, and not worth investing in. The property you invest in should be in reasonable condition to ensure you can turn a profit. You don’t want to run your wallet dry attempting to repair a run-down mess.
6. Amenities.
People want to live in neighborhoods with a lot to offer. If your property is in a neighborhood with little access to public transit, few restaurants, and far away from grocery stores, not only is it less valuable; it’s going to be more difficult to find tenants.
Buying in an area with a lot of amenities can be pricier, but in the long run it may be worth it, particularly if an area is continuing to develop and become more desirable. Parks, gyms, theaters, malls, and more are great amenities for a neighborhood to have. One way to buy a bit cheaper – though it can be a gamble – is to research future projects in an area. If it looks like many amenities are soon going to show up, you may choose to invest.
Investing in a property shouldn’t be taken lightly. Even if you think you have a clear idea of what a wise investment looks like, it’s easy to make a mistake that could cost you big. For more advice on investing and becoming a landlord, contact Green Residential today.
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