What To Look For When Purchasing Rental Properties
I’m sure you know that buying rental properties is a great way to generate income and build your wealth. But you must keep in mind that a rental property is a serious investment. Doing your homework and finding the right deal is definitely a prerequisite.
I’ve seen investors purchase rental properties with the best
expectations only to watch their investment become a problem child or money pit because of location/neighborhood factors, unforeseen maintenance issues, poor tenant choices or bad decisions like hiking rent up too high for the market. We all need to learn the ropes and sometimes this means making mistakes and learning from them.
Are you interested in finding a cheap property to either live in, rent out or flip? Join the foreclosure Insiders Club to access a list of distressed properties in your area that desperate owners, fearing bank foreclosure, could be selling at bargain!
I’ve compiled this list to help you find a good rental deal. If you’re even thinking about buying a rental property, you should definitely watch for the following things:
1. Good location. Traffic is good, because it makes rentals easier to rent. Signs can pull more response than an ad in the paper. Also, if it’s in a nice locale, it will usually rent faster. Nice locales include places that are close to amenities.
2. Good numbers. Verify every last expense, figured them into your calculations, and be sure that you’ll have positive cash flow from the start. One of the biggest mistakes investors make is to start with negative cash flow.
3. Expensive homes. High home prices create rental demand. What do people do if they can’t afford to buy? They rent, of course. Look in areas with high house prices.
4. Low maintenance properties. Cedar-shake roofs and wood-sided buildings just mean more expense and trouble. Look past current expenses to how much maintenance the building will need. Lower maintenance means fewer headaches and more profits.
5. A good rental history. Look at the rental history, and note how long residents are staying on average, and how often they pay on time.
6. Below-market rents. Buying rental properties with below-market rents is a sure wealth builder. It means you get to raise rents, and that means you immediately raise the value, because rental property values are based on income.
7. Complies with fire codes and zoning. Have the property
inspected, and ask local officials if there are any existing
problems. Sometimes a violation that was tolerated for years won’t be tolerated once a new owner is in the picture.
8. Less than 25 years old. The number is somewhat arbitrary, but if you limit your search to newer buildings, you’ll be less likely to have building code and maintenance problems.
9.Owner/manager is out of state. These properties are often the best deals. It can be a real headache to manage a property from far away. Out-of-state sellers are often more concerned with a quick sale than a high price.
10. Stable or improving neighborhood. It’s okay if it’s stable, but if you can buy in a neighborhood that is improving, you’ll rent the units more easily. This less vacancy, more income, and therefore, automatic appreciation in value with time.
As you look at properties, you’ll find other things to add to this
list. Some things are particular to an area, like local rental
codes that tell you what you have to fix or improve.
I’ve had some success at finding solid rental properties by joining the foreclosure Insiders Club – where my membership gets me the inside track on potential rental properties that are available at bargain prices in my area. Membership to the foreclosure Insiders Club grants me access to a listing of pre-foreclosures that desperate owners are looking sell! I can watch for properties that may be going up for auction. This site gives me access to information before other realtors or investors in my market know anything – keeping me ahead of the game! I highly recommend it!
Add these to the list above, and actually carry the list with you, so you don’t forget anything. Watch for the right things, and you’ll be safer and make more money buying rental properties.
To Your Success!
Aiden Win
Mr. foreclosure
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