What to Look For In a Residential Rental Investment

4 minutes read

Investing in real estate can be exciting and scary at the same time. While you might stand to make a decent profit, there is always the chance of serious loss too. Before you buy a home for rental purposes, consider what you should look for to make the most of your investment.

WHAT’S ITS CONDITION?

What are you looking for in a rental home? Are you the type to buy fixer-uppers, make them pretty and then rent them to others? Or would you prefer a home that is pretty much move-in ready, enabling you to secure renters right away?

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This is something you need to give careful consideration. If you decide you have the ability and money to fix a home up, you’ll have to decide how much work you are willing to take on. How much money do you have and how much time. Do you want to use up all of your resources just on fixing up the home?

You must consider these questions before you buy an investment property. Are you in it to find a home as cheap as possible and then fix it up yourself or can you spare the extra money and buy a home that is in good condition?

WHAT ARE ITS FEATURES?

As you look at potential homes, think about their features. Are they the features potential renters would want? Typically, renters are not looking for luxurious accommodations. They want a home that they can be comfortable in and be close to the amenities, but they don’t want to overspend. Renters usually keep things pretty reasonable.

As you do your research, determine what the average renter in the area looks for – is it a big home with a pool or is a smaller home that is close to the local schools? Knowing what the renters in the area prefer can help you determine what will be the most profitable.

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WHAT’S THE NEIGHBORHOOD LIKE?

The neighborhood plays an important role in your investment. While you will need to consider things like safety, schools, and curb appeal, you’ll also need to figure out if it is an area where renters want to live. What percentage of the homes in the area are rented? Is it an area that tenants often look for homes? It doesn’t make sense to buy a big expensive house in a fancy neighborhood if renters are not going to think to look there for a home to rent.

Think of the area surrounding the neighborhood as well. What’s there? Is shopping nearby? Is it located near a college? Is it near reputable schools? These are things that will catch the attention of potential renters. If there isn’t anything suitable nearby, chances are the renters will look elsewhere.

WHAT WILL THE INSURANCE COST?

Don’t overlook your need for homeowner’s insurance. This is worth checking out before you agree to buy a home. Talk to an insurance agent about the area and the home. Make sure you let him know that you will be renting the home out too.

The insurance company will care not only about the value of the home and how much you borrow, but also the hazards that the area is prone to, such as hurricanes, earthquakes, and floods. Knowing the amount of the premiums may alter your decision to buy the home if they are too costly.

WHAT ARE THE TAXES?

As the owner, you are responsible for the real estate taxes on the home. Taxes that are too high could eat away at the potential profits of the home. You should figure out the cost of the taxes and how much they take away from your potential profit.

Don’t forget that property taxes can change too. It’s not unusual for them to increase each year, especially in metropolitan areas. You’ll want to keep this in mind as you figure out if a home is a good investment or not.

Deciding to buy a rental home is a big decision. It’s not a home that you will live in, so you’ll need to think of others. Do your research and determine the trends in the area. This way you can figure out the best home for you to buy as an investment, helping you to make the largest return on your investment.

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