What to Look For When Buying Rental Property: Make Profit From It

If you’re about to invest in a rental property as a way to earn money, there’s more than just purchasing the first one you see. After all, you’ll need to think about rental properties more, since you’re catering to more than just one type of renter. If you invest badly, you can lose money in the long run!

That’s why it’s important to learn how to buy and renovate houses for profit properly. For those wondering where to begin, read on! I’ll be showing you helpful factors to consider when purchasing rental properties to create a profit from it.

What to Look For When Purchasing Rental Properties

Just like purchasing a property for yourself, you need to make sure you select the suitable and worthy one people will enjoy and make use of. With that said, these are the four main aspects to look into before getting a rental property:

Where’s the Property Located?

You’ll never be able to change the property location when you purchase it, so this is the crucial point to consider when you’re evaluating potential investments.

For instance, properties near colleges are ideal. This is because new students will always be looking for housings, with parents usually paying the rent. Rent can go higher because of the increased demand for properties within their colleges!

Here are the following factors to consider in terms of properties:

 

  • Is it in an urban, suburban, or rural area?
  • How far is it from necessary places like supermarkets, malls, schools, hospitals, and transportation?
  • Who are the tenants you’d want to live in the area? Would you prefer families, singles, seniors, middle-classed groups, etc?
  • Are there higher demands for rentals within the location?
  • How far is the property from your main residence? If it’s farther from where you live, you need to add transportation expenses and time lost from the commute.
  • Is the neighborhood the property is from stable, declining, or expanding? Do you see more vacant properties or new construction?
  • Is there an opportunity for the property to grow in the future? Such as new railroad lines nearby or new companies being established for more job opportunities.

How Much Is It?

Of course, the property price is another crucial factor to consider, since this is what you can afford and what determines your return of investment. Make sure you know your budget and the true value of the rental property, asking yourself the following questions:

  • How much can you budget for the property investment?
  • How much are you willing to (hypothetically) lose?
  • If you require more funds, where can you get it from?
  • How much should you borrow and what is the monthly mortgage payment (with interest)?

Now, determine the property’s value by doing the following:

  • Ask for the property’ income and expense sheets
  • Calculate the property’s Net Operating Income
  • Identify the area’s vacancy rate and the projected rent
  • How much are insurance and taxes?
  • How much will property maintenance be?

These are helpful in identifying if the property is worth it and if you get a good return of investment in the long run.

Besides this, you should also understand the current real estate market. You don’t just factor in what YOU want, but what others want and can afford.

I recommend that you check its resale value or a foreclosed property to rent out, which can give you more in the future. Also, think simple and with necessities in mind rather than useless frills like Jacuzzi and the like.

What Are the Necessary Repairs?

Of course, the property price is another crucial factor to consider, since this is what you can afford and what determines your return of investment. Make sure you know your budget and the true value of the rental property, asking yourself the following questions:

  • How much can you budget for the investment?
  • How much are you willing to (hypothetically) lose?
  • If you require more funds, where can you get it from?
  • How much should you borrow and what is the monthly mortgage payment (with interest)?

Now, determine the property’s value by doing the following:

  • Ask for the property’ income and expense sheets
  • Calculate the property’s Net Operating Income
  • Identify the area’s vacancy rate and the projected rent
  • How much are insurance and taxes?
  • How much will property maintenance be?

These are helpful in identifying if the property is worth it and if you get a good return of investment in the long run.

Wrapping It Up

Purchasing rental properties is quite a tedious process, but you can lessen the stress through proper research and evaluation. Sure, it can take some time, but it will pay off with satisfied tenants in the long run! The next step is to learn how to renovate your profit and make sure it caters to your target audience!

Hopefully, these things to look for before investing in rental properties gave you an idea of what to look for. So start doing even more thorough research to get your investment’s worth now.

If you have any questions or would like to share your own tips when purchasing rental properties, comment below! Your thoughts are much appreciated.

About Chris

Check Also

Home

How to Choose a Home Inspector in Denver

Finding a good home inspector in Denver goes beyond just checking credentials. When you are …