Buying Rental Property? Consider These Factors

Rental properties are attractive prospects for brokers, agents and investors looking for a steady stream of income. These can be especially profitable at times when interest rates are low. The idea of rental income rolling in every month is tempting and then there is also the possibility of the property appreciating in value.

However, owning rental property can also be quite risky. Consider the following factors before diving in:

Neighborhoods

The quality of the neighborhood includes the type of schools in the area, the level of crime prevalent there as well closeness to jobs, offices, restaurants and life’s other necessities. The neighborhood decides the types of tenants you attract and how often you’ll have to deal with vacancies.

Property Taxes

Property taxes are not the same across the country. Agents and brokers planning to make money from rent should do their due diligence to find out how much money will be lost to taxes. High property taxes aren’t always be a bad thing if the neighborhood attracts long-term tenants. But the two aren’t mutually exclusive.

Building Permits and Future Development

If there are many new condos, business parks or malls being constructed in your area of choice, it is probably continue on the path to good growth. On the other hand, watch out for these new developments because some of them could also hurt the price surrounding properties by, for example, causing the loss of a nearby park. The added condos and housing in the area could also provide competition for your renters, so be aware of that risk.

Amenities

A neighborhood with current or planned parks, malls, gyms, movie theaters and other bonuses attracts renters. Cities, and sometimes even particular areas of a city, have loads of promotional brochures and websites that will give you an idea of where the best public amenities co existing with high quality, rentable private property can be found.

Rents

The whole inspiration behind all your handwork, rental income must also be thoroughly investigated before you put your money down.  Find out what the average rent in the area is. If the average rent in the area can’t cover the mortgage payment, taxes, refurbishments and other expenses, then you have to keep looking for a more profitable option. Research the area well enough to determine how it will grow in the next 5 years. If major improvements, developments and increases property taxes are expected, then what’s affordable now may mean insolvency later.

The Last Word

Every city has some amazingly profitable and livable neighborhoods and every neighborhood has good properties available for rent or sale. Just remember to keep your expectations reasonable and make certain that your own finances are in a healthy enough to bear the weight of a huge investment in a rental property, while you wait for the property to start producing cash flow rather than needing it desperately. Real estate investing doesn’t start with buying a rental property – it begins with creating a financially feasible situation where you can afford to be landlord.

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Posted in Real Estate Education