Current market trends in home prices and unsatble mortgage interest rates have created the perfect opportunity for people looking to invest into rental properties. With smaller down payments necessary to secure a property, an investor will find that they can quickly build a portfolio of rental properties.
However, it is very important, especially if you are new to real estate investing, that you consider these tips before purchasing a property. This will help you evaluate if your prospect is profitable enough for you to invest.
Who Will Maintain The Property?
If you are going to perform all of the maintenance and upkeep on the home, as well as interview tenants, collect rent and other management duties, you will need to look for homes that are relatively close to where you live. If you are going to use a property management service, you can increase the area in which you invest.
Look At The Neighborhood Closely.
A real estate agent may show you incredible deals on investment properties, but sometimes they are too-good-to-be-true. Take a little time and investigate the neighborhood in which you plan to invest. People do not want to rent in an area that they do not feel safe or comfortable.
Schools and Amenities.
The U.S. Census Bureau has recently released information from the 2010 census that shows more families are living in rental units now than in the last forty years. You will be able to attract quality renters when your property is near good schools, community activity centers, and parks and recreation areas.
Is the area that you are looking to invest into in a growth area? Research the economic conditions in the area. People will follow work, and if the work is gone, so are your chances of finding good renters.
Some communities thrive during different times of the year, while finding themselves lacking renters at other times. College area rentals will see high turn-overs of renters during the school year and empty apartments in the summer. This can also be true in southern parts of the country where retirees “winter” down south and go back home in spring. If you are financially able to maintain the property under these conditions, it still may be a great investment. However, it is something you must consider.
Check Local Rents.
You know how much you will need to pay each month in expenses. Make sure the area can support what you will be required to charge to cover expenses and make a profit.
Check Local Taxes.
Every community will have a different tax rate. Make sure that a great deal is not one that has high tax obligations that will diminish your profits.
Are there many listings in the local newspaper for rental properties? If there is little demand in the area, your property could remain vacant for an extended period of time.
Check Insurance Rates.
Some areas will have higher insurance rates than others because of the location of the property. Areas where natural disasters occur more often will be more expensive to insure.
Review The Property For Problems.
This is perhaps the most important point to remember. Sometimes a great deal is so great because there are so many necessary repairs required to make it code compliant as a rental that the investment is no longer lucrative. Have a home inspection performed and make sure you inform the inspector that the property will be a rental.
These tips would only serve as a simple guide for your entry in the real estate investment field. Checking these factors would help you find the property that will be profitable. Aside from these factors, there a lot more steps to consider to complete your venture in this field. I would say that the next important step you have to think of is finding a mortgage lender for financing your property. This would include banks, credit unions, and mortgage brokers. Partner with the right lenders that can help you with your situation.