The Characteristics of a Profitable Rental Property

By | November 5, 2017

From the second you decide that investing in real estate would be a good idea until the moment you purchase your first rental property, there are lots of things you need to think about. If you want to make money, then you need to know and look for the essential characteristics of a profitable rental property, so that you don’t end up buying a dud. The good news is, I’m going to save you a lot of time and effort by telling you exactly what those characteristics are right now….

A Good Neighborhood

Whether you plan to invest in a studio for students, a large home for a family to occupy, or someone else entirely, it is important that you consider the kind of neighborhood you plan to buy in. If you purchase a property, no matter how affordable or seemingly nice it might be, in a neighborhood that has a high crime rate, poor transport links, and few important amenities, than you’re never going to make a s much money as you would if you bought in a neighborhood that was exactly the opposite. So, start researching the quality of the neighborhoods around you right now.

The Cost of Property Taxes

Unfortunately, property taxes are not universal across the board, so if you’re planning to make as much profit from your rental properties as possible, you really do need to delve into that whole area and work out where would be best to buy to minimize taxes and maximize your profits.

The Area’s Schools

If you’re planning to target the family rental market, then you absolutely must look into the availability of good schools in the area. Why? Because parents are not going to want to move into neighborhood where their school choices are poor  – it’s their children’s future that will be effected after all.

The Availability of Jobs

It’s rarely a good idea to invest in properties in areas where jobs, and particularly good jobs are scarce on the ground. Not only do job deserts not attract people to them because…well, where are they going to work? But there’s a much higher chance that your tenants will eventually defaulted on the rent. All it would take for them to lose their job and then struggle to find a new one for the situation to get serious and your bottom line to be hurt as a result.

Building Permissions and Future Developments

There’s nothing worse than investing in a nice property that you’re confident will fetch a pretty penny only for a sewage plant to open up alongside it a year or two later, ruining your chances of making a profit and making it very difficult for you to sell the place on. Although this might sound like an extreme example, things like this can and do happen all the time, which is why you should always head to the local municipal planning department to check out and permits that have been submitted and any new projects that are likely to be developed in the area you plan to buy in in the future. If you don’t do this, then you only have yourself to blame when your rental property doesn’t bring any money in at all.

The Level of Local Listings

Before you buy, it’s always worth looking at how many property rentals listings there are in the area already. If there are a lot of them, not only does that mean you’ll have a lot of competition to contend with, but more importantly, it could indicate that the neighborhood is no longer desirable. Of course, it could also mean that the demand in that area is only seasonal. So if you’re looking to rent, for example, vacation homes, seasonally, then it might not be such a problem for you at all. Just makes sure that you can still make a profit taking the off season into account.

How Much is the Rent

Of course, it also makes sense to check out how much rent is being charged in the neighborhood, since it’s the rent that will be making you a profit or not. If the average rent in the area, after some investigation, won’t be enough to cover your mortgage, tax and maintenance costs, then there really is no point in you buying there, and you should immediately start to look elsewhere.

The Weather

You might be thinking that the weather has little to do with the profitability of a rental property, but you’d be wrong. You see, if you buy in an area where floods, hurricanes, or other natural disasters are common, then the costs of maintaining, repairing and ensuring your property could be too much for you to make any real income at all.

The Local Renters Like It

Something that a lot of property investors fail to do, but which I think is pretty important, is actually visiting the neighborhood they’re interested in buying in and talking to the locals -particularly those who are renting their homes. They will be a fountain or information about what is good and bad about the area and whether it is a good place to be. Why? Because they have no stake in the neighborhood’s having a good reputation!

A Solid Property

Last, but certainly not least, when you’re looking to rent a property, you should look for a place that is solidly built, without too many serious flaws such as rising damp or a quickly deteriorating roof.It can be quite basic in most respects, but as long as the foundations of the place are in good shape, it’s unlikely you’ll  have to spend too much money to bring it up to acceptable rental level, and give yourself a good chance of making a great profit.

The bottom line: It is possible to find great rental properties in pretty much every city, but you can’t just buy any old place and expect to make a good income from it. You need to put the time and effort into finding a home that has all of these characteristics, and that means that you need to be realistic about your budget and what is possible. If you can do this, your chances of success are high.