What Should You Look for in Rental Properties for Sale?

If we are to talk about the most most important trends in the real estate markets out there right now, there is no doubt that rental properties meet one of the highest demands. The reason for which rental properties for sale are highly in demand is that they offer a sound and secure investment option and provide a way to make short-term and long-term income along the way. The idea behind purchasing investment properties is to start investing in real estate through a segment that is considered a necessity and not a luxury. Rental properties will never stop being in demand because potential tenants include all those who can’t afford to purchase their own real estate property; with overpopulation and immigration in the United States those numbers are likely to grow.

For investors, buying among rental properties for sale is not a simple decision that can be made within an instant. Some income properties have proven to be a source of negative cash flow rather than a source of income for real estate investors. It is vital that an investor does his/her research thoroughly before making a decision whether to go for a certain real estate property or no. This leads us to the core of this article, namely: What should a real estate investor look for in rental properties for sale? Is it the price? The location? The answer is not a complicated one, but there is a list of features that make some rental properties for sale better investment choices than others. Buyers have a variety of options of how to find investment properties that meet a minimum criterion in each area: hiring a real estate agent, using an investment property calculator such as Mashvisor’s interactive calculator, or doing the research and real estate market analysis tasks personally.

Related: How Your Investment Property Can Compete in the Rental Market

5 Things to Look for in Rental Properties for Sale

1. the Right Neighborhood

Let’s be straightforward about this point. Location is everything in real estate as they say. No one will be interested in renting an income property that is located in a bad neighborhood that is far from life, crime infested, or without proper services. Investors who wish to make money in real estate must invest in a good neighborhood to stand any chance of making profit. Even if a bad investment can be rented, it won’t be going for serious money, which leads to horrible investments when we calculate taxes, insurance, repairs, and expenses. If you go for a bad neighborhood, you actually risk to end up with a negative cash flow property.

Find a good neighborhood to invest in and look for real estate properties there. Looking for cheap properties in an entire city makes it a broader search that can be too confusing and tiring. Mashvisor provides its clients with the ability to search cities and neighborhoods through the click of a button. It also gives them the ability to filter their search results based on a set of different criteria. This is a very useful tool if a real estate investor wants to take control of things and understand all factors involved. Mashvisor’s search tool is innovative, time-saving, and effortless for all its users.

2. The Price of the Property

Before purchasing any of the available rental properties for sale, it is important to check the average market price of similar listing in this location. Many real estate investors go rushing to purchase investment properties that are below the average market price thinking they have found a bargain. However, later on they figure out that the price was lower than the rest for a reason; for example, the income property could be in need of intensive repairs or it could be located in an unfavorable location and so on. A lower price of a property is not always a positive thing; that’s why doing your research is important. The same also applies to properties that are overpriced. Yes, they could be portrayed as more luxurious or fancy, but as an investor it is your job to calculate if the higher price is worth it. Some real estate investors choose to purchase average priced income properties and renovate them to become luxury rentals, which can be cheaper than buying overpriced rental properties for sale.

3. The Rental Income

When buying one of the many available rental properties for sale, a real estate investor needs to look at one very important success factor: the rental income that he/she will be able to generate through the tenants. Understanding the average rental income in the area where you are purchasing you investment property is extremely important. What is the point of buying a rental property if it will be destined to fail and not generate enough money to cover all expenses and to bring you a positive cash flow? A rental property’s income should be enough to cover the mortgage payments, taxes, and any other costs that will be incurred by the investor. Some might argue that breaking even on your rental property is enough; this might be true in some cases, but in today’s market, that is considered a failure.

Related: How Much Rental Income Should You be Making?

4. The Expenses and Repairs

Before making a decision on which of the rental properties for sale to go for, a real estate investor must examine all aspects of the investment property. The condition of the income property gives a clear indication of the repair expenses that are to come soon. If the property is damaged or has a faulty structure, then the repair costs will be extremely high. Investing in extremely damaged properties is a bad idea if profit is the motivational factor for this purchase. Finding a rental property in an acceptable condition should be your minimum standard.

It goes without saying that all rental properties will be subject to expenses in the form of taxes, insurance, or utility expenses. A smart investor interested in rental properties for sale would research the average expenses that other rental property owners pay on a monthly and annual basis to have a clear-cut financial plan. The plan will be finalized when the real estate investor is able to collect data on the rental income minus the expenses to know the expected profit or loss from that income property.

Related: The 6 Hidden Costs of Owning Rental Property

5. The Services and Amenities

This is more marketing than investment. Rental properties can be more attractive to tenants if they have some features that make it easier for the tenant. A property that is located in a good school district is a positive and could be a factor in a better rental income. Security and amenities (gyms, pool, etc.) are considered a bonus; a gated community, for example, is not a necessity but is a differentiating factor when compared to competitors.

Conclusion

It is easy to understand the demand for rental properties for sale in today’s market. Real estate resembles one of the most secure and stable investments in the business world today. Nevertheless, there is a difference between real estate investors who rush into income property investments and those who have a certain standard that makes them successful. All successful rental property owners have to some effort into putting together a list of crucial features to look for before purchasing one of the available rental properties for sale. This level of organization and dedication is what molds beginners into big time real estate investors.