Investment Properties: What to Look for When Purchasing a Rental

Investment Properties

 

Investing in a rental property can increase your income, but it is not without its challenges. Like many other investments, it can offer a good return on your money from the start. Unlike many other investments, it requires you to be more hands-on. Unless you hire a property manager, you are going to have a part-time job as landlord, maintenance worker, repairman and depending on your tenant, sometimes counselor. So if you want to make sure your investment is worthwhile, be sure to make sure you cover your bases with these tips in mind.
Rent of Nearby Comps
This is perhaps one of the most important factors to pay attention to. If your home is going to cost you $900 in a mortgage payment, but nearby homes that are comparable to yours are only able to collect $700 or $800 in rent, this is not a good buy.

Property Taxes
This goes hand-in-hand with knowing nearby rent prices. If the taxes on the home typically trend upward, then you can likely expect a little bump in your payment. According to CNBC, the addition of a lake, golf course or other amenity can inflate your property taxes as well. If you plan on making renovations to the home that will require you to take out permits, this will increase your home’s worth and as a result, your property taxes too.
Proximity to Schools, Hospitals and Public Transit
You may know that quality of the property has a lot to do with what you can charge for rent, but just like everything else in real estate, location is paramount. If nearby schools, hospitals and transit make the property a good value for you, they will make it valuable to a tenant, too. People want to live near transit to get to work, highly-rated schools for their children, etc. These are not only convenient but they often mean there are lots of employment opportunities for your tenant nearby, too.
Crime Rate
Living in Durango, we are lucky to see a low crime rate. Other cities are not so lucky. Consider what the crime rate might do to your insurance and expenses related to home security. In addition to your costs going up, the price of your rent might have to come down to entice renters.
Future Development
This can make or break your property’s worth. If many amenities are moving in, then you will likely see a lofty increase to your home’s worth. Conversely, if you know a new jail is being built nearby or newer condominiums, you may reconsider. I don’t have to tell you that a jail near your home makes it less attractive, but you may not have thought twice about new condominiums. They can make your home pale in comparison and/or increase competition potentially forcing you to drop your rent.
Reliable Property Managers
You probably saw a shameless plug coming, but this point is legitimate! If you don’t intend on living near your rental or managing it yourself, be sure you have professional property managers you can hire out to nearby. Of course, if you are Durango, please give us a call at 970-259-0222.

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