Managing a rental property as a landlord can be a great way to generate passive income each month. But finding worthwhile investment properties requires knowing what to look for, which may be hard to do when beginning your real estate investing journey.
It’s important to purchase rental properties with promising rates of return that can attract local tenants’ interest. Here are eight things to look for in a rental property that can help you identify the best option for your portfolio.
Tenants typically prefer rentals that are near public transportation, grocery stores, and schools. You’ll want to pay special attention to the neighborhood the rental property is located in to ensure it’s in an area that offers tenant-friendly benefits.
If you come across a property that has a great asking price, but is far away from public transit or schools, then this may deter tenant interest in the property. Researching the neighborhood you’re interested in beforehand to see which properties are relatively close to recreational parks, public forms of transportation, and stores can reduce the chances of this happening.
2. Low Property Taxes
Property taxes vary depending on the location of the property, with some cities having lower property taxes than others. However, it’s important to note that tax rates can change throughout the year, so even if they were originally low, they can experience sudden spikes in cost. For that reason, you’ll want to find a property that’s had a consistent history of low property taxes.
Being near highly-rated schools can help attract tenants, as well as increase the value of the property once you’re ready to sell. Nearby colleges are also something to take into account since college students will be looking for nearby rental properties for the academic school year.
4. Average Rents
Tenants prefer rental properties that are in their ideal location, offer the amenities they’re looking for, and have a fair rent price. While you can search online to see what other landlords are charging for similar properties, an Rent Analysis Report provides insights on rental benchmarks for your designated area, the local demand for rental properties, and comparable for-rent properties with their listed rent price.
Amenities can be anything from an in-unit washer and dryer to a balcony with a view. The more the rental property can offer to tenants, then the easier it will be to attract tenants and charge a rent price that can generate income each month.
6. Property History
A property’s history can provide insight into how often it’s been put on the market, how soon the previous owner put the property back on the market, and the total amount of property taxes it generated.
Since the goal of this property is to expand your real estate investing portfolio, you’ll most likely want a property that’s in great condition and can be rented out for several years by tenants. If you find that a property has repeatedly been listed by previous owners soon after purchasing it, then there may be some issues with the property you’ll want to be aware of before buying it for your rental business.
7. Home Values for Nearby Properties
Similar to rent prices for local properties, you’ll want to see how other homes in the neighborhood are priced for the amount of square footage they offer. This can help you determine if the asking price for a property is too high or low based on local trends in the designated area.
8. Demand for Rentals
The local demand for rentals is important to be aware of before purchasing a property. A relatively low demand for rentals can make it difficult to have an ongoing stream of income from your property since not many local residents are looking for a rental property in the first place.
How to Find a Good Rental Property
Before you begin exploring websites that have for-sale properties listed, the first step is identifying what type of property you’re looking for. This can be either a single-family home or a condo in a multi-unit property, both of which can be a great addition to your portfolio.