Finding a rental property that checks all the relevant boxes is the dream of anyone who engages in any property rental exercise. The misconception that any property can be magically turned into a cash-spinning rental is a common one amongst most noobs in the property rental business. But here’s a dose of harsh reality; there are quite a number of factors which greatly influence just how much financial clout the property in question will garner. It is grossly inadequate to run a few quick fixes, slap a “For Rent” sign on the property and wait for a horde of prospective clients to flood the property. A number of apparently inconsequential factors could undo all your hard work. Your investment could be dealt a fatal blow if a poor market or weak demographics surrounds the location of your property. But it is not all difficulties and uncertainties in the property market. The right property in the right area is potentially a goldmine. You can rake in huge sums and smile to the bank on a monthly basis with the right investment in the right property. This can ensure steady cash flow and financial security in the long run. For as long as the property is in your ownership, a return on your investment is more than guaranteed. More often than not, the problem lies not in finding the means to invest but in finding the right property to invest in. Here a few tell-tale signs that you may have stumbled upon the perfect rental property investment opportunity. This is how to identify a quality rental property when you come across one.
A premium has to be placed on the choice of location of the rental property because it is a defining factor that can make or mar the chances of success of your investment. The area surrounding the property and proximity to markets, residential areas and utility centers are factors that weigh in heavily when determining what location makes a property ideal for investment. If the property in question is a rental property, then you need to think outside the box and take a view from the tenants’ perspective. The purchase of the property may have come at a bargain, you may have struck gold in the buying negotiations but if the area around which your property is located is not alluring, you may find tenants hard to come by. And if they do come by, you may find them unwilling to pay as much as envisaged or estimated initially. There is certainly no substitute to paying a little more for a property in a good location. I mean, why settle for less when you can get much more for a little more? Doing this does not just guarantee maximum cash flow but you will certainly be doing business with tenants who will stick around for a while instead of those ones who lay low for a few months and move on to the next like your property was just a brief stop along the way and not the destination, bringing you back down to ground zero consequently. The frequent property vacancies will eventually drill a large hole in your pocket. Parting with your hard-earned money for a property in the wrong locale may yet become a decision you will rue for years to come. If a property doesn’t tick all the boxes for you, then it sure wouldn’t cut it for your tenants.
- Demographics of the Area:
While searching out a decent rental property to put your money on, a good knowledge of the population within the area and how this population may change in the coming years is relevant. There is definitely some truth in the assertion that there are more renters today than there ever was but going for a property in an area with lagging demographics will pose problems as the prospective tenants will surely have their heads turned to a different location where the grass looks greener. Background checks on the overall strength of the town’s economy are strongly advised. Place the job market under scrutiny. The statistics may imply that the unemployment rate in the country has dropped but statistics are like miniskirts, they don’t reveal everything, and they are always susceptible to change. If the numbers do indicate that there has been a mass exodus of job source from the area, you can bet on dropped rental calls. Another reliable index of demand are the local educational institutions, Prospective tenants would rather rent in a property that can afford their children the opportunity of quality education. If the local school is offers little in the way of quality education or there are grapevines of a potential school closing, you might want to put your money elsewhere. Another demographic variable which should be given critical consideration are the crime numbers in the area. We all crave a certain degree of security and safety in our property. That’s non-negotiable. If the numbers show that the crime rate in the area is on the high side, it is a bad sign. If sourcing for demographic information in the locale under consideration is proving a tough nut to crack, a call to a competent real estate agent or a visit to the town hall website is just a click away these days.
- Miscellaneous Expenses and Taxes:
While you bask in the euphoria of landing a decent property at a bargain, it may be wise to resist the overwhelming urge to rip that checkbook. There is always a caveat, a hidden detail associated with most properties. Cash flow does not just entail subtracting your mortgage payment from the rent received. You need to factor in such expenses as property taxes and insurance fees. You do not want to purchase a property that has accumulated years of backlogs in payment of taxes and utilities. And these payments are always getting hiked. A look at non-mortgage payments is also advised. For instance, if the property in question is ravaged by winter weather, you may need to factor in snow removal on your budget. With a property located in a largely hot and sunny area, exterior upgrades and lawn maintenance should be expected in the balance sheet. All these can easily add a few hundred dollars to your annual budget. These numbers are essential to your cash flow and it is imperative that you have an idea just how much expense you would incure with the property under your ownership.
- Nature of the Competition:
Keeping your eyes on the price is a very good strategy to landing a good rental property but the competition should also be watched closely. As though you were in a market trying to sell a product, you rental property will always be compared with every other available rental property in the area. A few improvements should not be expected to give you that 30% extra cash compared to the benchmark price available in the market. There are subtle ways you can keep the competition under surveillance; you can checkout a number of rental websites and property listings. A large number of them could indicate poor demand which translates to you having a hard time finding tenants. But if the reverse is the case, you might want to consider going a step further. You may even contact listed landlords for enquiries, most of them chomp at the bit to share what they know.
When searching out the ideal property to invest in, emphasis should be placed on the potentials and not the ephemerals. Most times, a few tweaks here and there can greatly increase the market value of the property. If adding value is the watchword, cash flow will know no bounds. There is more to rental property purchase than buying and waiting for renters. This will piece will help you identify the perfect property when it does pop up.