If you want to consider a long-term investment in real estate, rental property can be a great idea. These investment properties are quite exciting and rewarding if the right choices are made. The purpose of investing in a rental property can bring extra cash. For the first-time investor, taking the first decision to get into the landlord biz and finally into actually buying the property can be daunting. Amera Property Management says rental property investment is continuing to grow all over the world. Thus, we need to make sure that we make the best choice when it comes to finally buying the rental property. So, here in this blog, Gharpedia is going to tell you how to find a good rental property.
The Beginning of Your Search for a Proper Rental Property
Do your researches before you decide to look for a professional service. Doing proper research will help you to be clear on what are the things that matter to you. Having a real estate agent will bring unnecessary pressure to buy before you have found the property that suits you.
One important thing that you should consider is whether you will be managing the property by yourself or someone else will do it for you. If you will be managing the property, you should look for a property that is nearby to your current residence. If you are going to have a property management company to look after it, proximity will not be an issue.
Let us take a look at the top features you should consider when searching for a proper and right rental property.
What to Look for When Buying a Rental Property?
Is Your Neighborhood Safe & Secure?
The quality of the neighborhood will decide the type of tenant you will attract or how often you face vacancies. The neighborhood with high rents will help you to earn more money than those with less. Likewise, neighborhoods with a higher caliber of clients will also help to earn more. You will be able to make a more significant return on your investment if you select the right zone that will be at its peak desirability in a few years. You should check the vacancy rate of other rentals; this will give you a good idea. If they are full, you will have a chance to lease your property quickly.
Enquire About the Schools in the Area
Education institutions can prove to be a good selling point for the property that you will be renting. The investment value of the property increases if there are good schools in the nearby environment. This can be vital if you will be renting family homes. As parents will never wish to live in areas that lack quality schools. There should be elementary middle and high schools of good standards in the neighborhood. Be sure to check the potential school districts where you can buy.
What is the Property Tax of Rental Property?
Taxes can be a deal-broker when it comes to the property market. If you have chosen the target area to buy the rental property, make sure to check on the property taxes that are to be paid. If the neighborhood is appealing and there are chances of long-term tenants, even if the taxes are higher, it will be worth it. Calculate on the property taxes before you settle on the property. You can get all the tax information from the municipality assessment office or you can speak to the homeowners within the community. It is wise to consider the tax hikes in the coming years.
Determine the Crime Rate of Area while Buying Rental Property
No one will ever like or want to live in an area with criminal activity. Visit the police or public library for accurate crime statistics rather than asking the owner who just wants to sell the property to you. You should ask to enquire about the frequency of police presence in your neighborhoods. Investigate the specific area to tell whether the property you are looking to purchase is safe. Stay ahead and never invest anywhere unsafe.
What are the Social & Physical Amenities Around the Rental Property?
Take a tour of the neighborhood and check for current or projected parks, gyms, theatres, malls, public transport, and other perks that will attract renters. Explore the dining options. All these facilities will be attractive to the positive tenant. Check for promotional literature as this will give you a glimpse of how things function around the area. This will give your property a higher value. You can even see how far the place is from the grocery store.
What is Your Home-Buying Budget?
You cannot buy a rental property without figuring out your home-buying budget. You might want to visit the bank and check how much of a mortgage you can get, but you should first consider how much money you have with you. If that way, you can easily figure out how much money is left over from month to month. You may even want to have some carrying costs onhand in case you don’t get tenants for a few months after buying the rental property. Once you know how you can afford, you can start your property search. You will never want to buy something outside your reach. Even if the rent is coming in you will not want yourself to be put in a tight spot.
Buying a home is not an easy task, especially the first one. If you are planning to buy your first home, then read this article on tips for first time home buyers before you purchase.
Consider the Future Development & Building Permits in Area of Rental Property
You can get all the information on the new development that is coming in or has been zoned in the area from the municipal planning department. If there are new apartments or buildings, business parks, or malls being constructed, then it is probably a good growth area. But, watch out for new developments that can hurt the price of their surrounding properties as additional new housing can compete with your property.
Check Out the Number of Vacancies & Listings
If there are an unusually high number of listings for one particular neighborhood, this can be a signal that a neighborhood has gone bad. Make sure to figure out the right information before you buy-in. You should also determine if you can cover for any seasonal fluctuations in the vacancies. Same as listings, the vacancy rates will give you an idea of how easily you will be able to attract tenants. High vacancy rates force landlords to lower the rents to get tenants and low vacancy rates allow landlords to raise rental rates.
What is the Average Rent in the Area You are Going to Buy the Property?
Your rental income will be the bread and butter of your rental property. You need to know what the average rent is in that particular area you are going to buy the property. If charging the average rent will not suffice you to pay your mortgage payment, taxes, and other expenses the carry on your search for a different property. Ensure that you research well about the area well enough to gauge where it will be headed in the next five years. If you can buy the area now, but major improvements are in line and property taxes are expected to increase, that if it is affordable now can take you to bankruptcy later.
Possible Natural Disasters in Area You are Going to Invest
Insurance is another expense to be considered that you will have to subtract from your returns from the tenants. If the area is prone to earthquakes or flooding, paying extra insurance will eat away your rental income.
Collecting Complete Information before Purchasing Rental Property
All the sources will prove to be valuable to seek information from. Speak to the other renters as well as homeowners in the neighborhood. You will get all the details as renters will be honest to share the negative aspects of the area as they have no investment in it. If you have set on a particular neighborhood, visit the area at different timings on different days of the week to feel the real vibe.
Selecting the Property
For beginners, the best investment will be a residential, single-family dwelling or a condominium. Condominiums are of low maintenance as the condo association is there with help with many external repairs. You will have to worry just about the interior. Single-family homes attract long-term renters. Families are better than single people because they are financially stable and pay their rent regularly.
Determining the Rent of Your Rental Property
If you are unable to determine the amount of rent, consider the average rent for the similar properties of your kind that you are willing to purchase in that neighborhood and start from there. If you believe that your property worth more or less than this average price, then set the price accordingly. Avoid setting too high rents; you may end with unleased property for months.
To check what amount will work, calculate the total costs of your rental property and subtract the mortgage you will have to pay every month and divide the property taxes and insurance costs by twelve months and subtract all these with the expected maintenance and repairs allowance.
Consider Age and Life of the Building while Buying Rental Property
Collect all information pertaining to age as well as future life of the building. Both will govern your repair and maintenance costs. The future life has to be linked with your repayment time. If the building has already lived its physical life, not only your repairs cost will be higher but repayment period also has to be smaller.
Search Property Under Bank’s Foreclosure
The property sold by banks or financial institutions under foreclosure sales are most of the times available at very reasonable rates. You can also simultaneously arrange finance from the same banks. However make sure to assess the rehabilitation cost of the mortgaged house, as such properties are likely to be in run down condition due to poor maintenance on account of paucity of funds. You must also have necessary skills or agencies who can rehabilitate the house at minimum cost in as less time as possible.
Finally, Making the Purchase
Banks offer tough lending requirements for investment properties than for primary residences. Be prepared to pay at least 20% – 30% for a down payment along with the closing costs. Is the property being thoroughly inspected through a professional get a real estate lawyer to review everything before you sign in? Pay sufficient insurance.ConclusionBetween the moments you decide to invest in a real estate property to the actual purchase, you will have to do a lot of field research on the city, neighborhood, and good and bad properties. Set your goals realistically instead of just going for quick cash flow. Consider the criteria given in the article to look for a property and see that they comply with each other.
Call to Action
Investing in real estate properties should always be a long-term investment. Make sure that you are not just getting the rental income from the property but you are also accumulating equity.
After reading this, you must have a proper idea of how to find right rental property. We at GharPedia always think on a bigger side, so we have written a couple of article to help our valuable readers for getting the invested property ready to rent, Below are the tips for the same,
A Helpful Guide on How to Find the Right Apartment!
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Author Bio
Sai Charan Gundreddi – Sai Charan Gundreddy is an author and a freelance content writing specialist with over 3 years of experience in the field. A writer by day and a reader by night, he is loathe to discuss Hinderer in the third person, but can be persuaded to do so from time to time.