Because not all rental properties are created equal, it’s important to consider two key concepts: First, be clear on what you are looking for and second, be clear on the needs of prospective renters as well.
Let’s dig a little deeper.
1. LOCATION MATTERS
The first rule of real estate applies to a long-term rental investment property. Location, location, location. A great location is truly the key to getting a good return on your investment because not only does a better location bring in a better rental rate, but it can also minimize potential vacancy rates you may experience as a landlord, which means more money in your pocket.
What are the benefits of a desirable location? Good schools, good jobs, good public transportation, good parks, and recreational amenities including shopping and restaurants.
What other things should an investor look for? Consider the safety of the neighborhood. Before purchasing an investment property, check out stats including incidences of vandalism and petty crimes. Keep the long-term trends in mind.
2. THE NUMBERS HAVE TO WORK
Set emotions aside during the decision making process and lean into the numbers of the transaction.
Establish a sound financial strategy before you buy and remember that you’re covering operating costs and property taxes in the equation. Don’t forget to factor in the average vacancy rate. Often a ‘mid-level’ purchase has better “numbers” and is a better investment than a high-profile rental.
3. THINK LOW MAINTENANCE
Consider Projected Turnover Rates: High turnover rates (such as those found in student areas) can increase the maintenance requirements on a property because these properties take more time and effort to maintain and to keep occupancy rates high.
Consider Your Proximity to the Property: Location can also play a major role with maintenance. Make sure your property is reasonably close to your home base if you prefer to manage it yourself. Otherwise, the time, effort and money involved in maintenance will quickly become a burden.
4. FUTURE APPRECIATION
Consider appreciation in two ways: first is when you buy the property, and the second is when you sell it.
What updates can help with appreciation? Will a new coat of paint increase the potential rent? A few cosmetic updates generally increase the profitability of your rent—especially if you do some of the updates yourself.
Property generally appreciates, but ideally, you want an investment that will increase in value more than the rest. Carefully examine the appeal of the property’s location. Is it on a cul-de-sac or is a new park being built around the corner? New amenities can increase property values in the area.
5. LOOK FOR NORMAL AND PRACTICAL
Normal means practical. Normal means reasonable condition. Normal means a place where people desire to live.
Practical means a 3 bed/2 bath with an expected layout. Practical means a low-care backyard. Practical means good schools and nearby employment centers.
Impractical means that charming Craftsman with wallpaper in every room.
One more important piece of advice: Get to know and understand the types of people you will be renting to and meet the needs of that clientele in a reasonable fashion without breaking the bank. For example, seniors prefer single level living. Young families may seek nearby parks or would like to live in a favored school district.
Bottom Line: Keep it simple. Stick to the basics. And find long-term success.
Check out my listings as potential long-term investment property opportunities. If you have any questions, I’d be happy to walk you through the amenities of the properties. And I’d love to help you in your search to find that ideal property to add to your real estate portfolio!