For many, the purpose of taking on a rental property is to bring in extra cash. To ensure your apartment or home brings in as much money as it can, compare it to the following ten characteristics, which tend to escalate a rental’s desirability and profitability.
1. The Neighborhood
Familiarizing yourself with the city in which you’re buying is the first step in choosing a rental property. You’ll want to make sure you’re choosing a property in an area that’s desirable. If you can’t afford an apartment or home in the area’s most popular neighborhood, figure out which ones are up-and-coming and look there — you’ll likely make a more significant return on your investment by choosing a zone that’ll be at its peak desirability in a few years’ time.
You should also look into the vacancy rate of other rentals. If they’re all full, you have a good chance of leasing your space quickly.
2. Your Budget
You can’t buy a rental property without first figuring out your home-buying budget. You might go to the bank and see how much of a mortgage you can take out, but you’re better off crunching numbers on your own first. In that way, you can figure out how much money is left over from month to month — you’ll want to have some carrying costs on-hand in case you don’t have tenants locked down for a few months.
Once you know how much you can afford, then begin your search. You don’t want to buy something outside of your set parameters — even if the rent coming in is right, you don’t want to put yourself in a tight spot should you be unable to find the right person to rent.
If your rental property is a family home, get in the mindset of parents who might consider renting. Their first concern will probably be the quality of schools in the area. So, be sure to examine the potential school districts in which you can buy. Either choose a home in a good area so parents will be pleased, or select a smaller property for couples or young professionals who won’t be as concerned about public schools.
4. Kitchens and Bathrooms
You won’t be living in your rental property, but someone will. And there are some features that will help sell the place to potential renters. Today’s real estate market is all about kitchens and bathrooms, so focus your updates here. Updating the kitchen appliances, painting the cabinets, and swapping out the countertops will completely revamp the property’s culinary center. Fresh tile, updated hardware, or a new showerhead will make even the smallest bathroom look more modern.
The good news is that any renovation of these spaces will only add value to the property you’ve purchased. If you decide to sell your rental down the line, then you’ve set yourself up to profit from your purchase by sprucing up the bathrooms and kitchen.
5. Property Taxes
Your rental income will probably cover your mortgage on the place, but you’ll still have expenses to consider. The biggest of all will probably be property taxes, so calculate how much you’ll owe before settling on a piece of property. Sometimes, the most sought-after cities or neighborhoods will incur a high tax rate, but the figure will be well worth it for the cash you’re bringing in. Some realistic forecasting on your part can help you decide if the property taxes are too high or just right.
City dwellers will already know how important of a feature this will be for some renters. The availability of a parking spot — or, at least, ample street space — is an essential feature to some. So, ask your realtor to show you properties with this feature. Even if your renter doesn’t need parking, you can use an included space to your advantage and rent it out for an additional sum each month.
7. Average Rental Price
In a perfect world, your rental fee will more than cover your mortgage, so that you can make money off of your property without lifting a finger. Of course, this is a luxury that many landlords won’t have right away — it might take some time for prices to catch up to your monthly mortgage.
Still, you should be familiar with the average rental price in the area in which you plan to buy. In that way, you can quickly calculate how much you can expect to pay off your mortgage after the check from your tenant comes in.
8. Planned Development
Even if you’re buying on a packed block where it seems as though there’s no space to develop anything more, you should still reach out to the local planning department. They’ll have the blueprints if there’s any impending construction or development of the neighborhood in the works. You’ll have a hard time finding tenants who want to live in the heart of a vast construction project, so a long-term plan could deter you from buying something you cannot market later on.
On the other hand, knowing there’s development in the works might be a plus for a property that appears to be in the middle of nowhere now. Just make sure it won’t be happening right next door, or else potential tenants will be turned off.
As with any extra-large purchase, you’re going to have to buy homeowner’s insurance for your new property. That might not be a huge expense on its face, but you should think about the area in which you’re buying. If it’s a hotbed for natural disasters — floods, hurricanes, earthquakes, etc. — you will have to pay more. The extra cost might mean you have to select a smaller, more cost-effective property from the start.
10. Nearby Amenities
Finally, get into the mind of your renter and figure out what nearby amenities will entice them to settle. If you’re purchasing a condo, the building’s features will be of the utmost importance. We already mentioned parking, but other popular features include home security systems, common rooms, and a fitness center.
If you’re renting a home, the amenities there will come with the neighborhood. Along with schools, see how far the place is from grocery stores, public transit links, parks, restaurants, and entertainment venues. Be sure to make note of these attractions on your home listing to draw renters in right away.
Buy to Rent
Considering these ten characteristics will make your rental property buying process a little bit simpler. And, with a thorough search process behind you, you won’t hesitate to sign on the dotted line and begin life as a well-informed landlord.
Kacey Bradley is the lifestyle and travel blogger for The Drifter Collective, an eclectic lifestyle blog that expresses various forms of style through the influence of culture and the world around us. Along with writing for her blog, she has written for sites like U.S. News, SUCCESS, Tripping.com, and more!