What to Know When Choosing a Rental Investment Property
Deciding to invest in a rental property can be a profitable and exciting move to make — but it requires some research beforehand. It’s crucial to do your homework and ensure you have a clear picture of what a rental property will cost you overall.
As you conduct research and view different properties, consider the following:
1. Your Budget
First, you need to determine how much you can afford. Buying a rental property involves many costs, including the down payment, closing costs and property taxes.
Fortunately, you don’t need all the funds sitting in an account to get started. Many types of lenders are available to help you finance your investment property. It’s important to research different lenders and mortgage options to find the best fit for you. The Nationwide Multi-State Licensing System lists licensed brokers, so this can be a good place to start your search for reputable lenders.
Once you know how much you need to borrow, you can set a budget.
2. The Location
Get to know the location you’re thinking about buying a property in. Knowing your location will help you determine how much rent you can charge, who you’ll want to target as potential tenants, and if it’s a promising area. Find out about details such as:
Neighborhood crime, schools and amenities
The number of vacant rentals
How quickly other homes sell in the area
What other similar properties are charging for rent
3. The Property’s Condition
The purpose of your investment is to bring in a profit. Ideally, you’ll want to find a property in excellent condition so you won’t need to make repairs and can attract tenants immediately. If a property needs some care before you can rent it out, consider if it’s financially feasible for you to fix — and if you’re confident it’s worth it.
As you view various homes, look for red flags like signs of mold. Mold can cause health issues, damage building materials and be expensive to remove. Check for things like:
Water stains on the walls
Water on the basement floor
If a home needs some work and you’re still interested, you may be eligible for a low-interest home repair loan to get it tenant-ready.
4. The Housing Market
Timing should also be a factor in your decision to purchase an investment property. You’ll want to buy when the time is right — typically when home prices are dipping. Pay attention to real estate news and get to know the housing market in your area, as every location is different.
5. How You’ll Manage the Property
As a landlord, you’ll have many responsibilities. These include maintaining the property’s grounds and making repairs in accordance with tenant laws. Before investing in a property, think about how you’ll manage it and whether it’s better to have a property management company handle these responsibilities for you.
Let Home365 Help You Achieve Your Investment Dreams
If you’ve been dreaming of investing in a rental property but feel overwhelmed by the management aspect, know that you have options. Consider partnering with a dependable property management company like Home365.