Investing in real estate is very lucrative. However, when you decide to buy your first rental property, there is so much work involved, which can be quite challenging for a first-time investor. Real estate is a demanding field and has many things that can destroy your returns if you are not careful. Here is a look at top 10 features of a successful rental property. You should consider these things when shopping for a rental property.
Quality of the neighborhood determines the kind of tenants your property will attract and how regular you face vacancies. Therefore, be careful with the neighborhoods in which you buy your property to avoid disappointments later.
2. Property Taxes
Property taxes vary from one region to another and if you are looking to make good money from rent, it is important to know how much money will be going to taxes. High taxes might not be a bad thing at all times, if the neighborhood is excellent for long-term tenants.
Your renters might have or be thinking of having kids, so they will prefer a place with a decent school nearby. After getting a good property close to a school, check the school’s quality as this might affect the worth of your investment.
People do not want to live in crime hot spots. Check with the police or a public library on the exact crime statistics for different neighborhoods instead of asking the property seller. Things to look for include: vandalism rates, petty crimes, serious crimes and recent activity.
Locations with growing job opportunities are likely to attract more tenants. Contact your local library or U.S. Bureau of Labor Statistics to find out the rating of a particular area. Avoid buying a rental property in an area that has poor job opportunity ratings.
Check the prospective neighborhood for projected or current parks, gyms, movie theatres, public transport hubs, malls and all other facilities that attract tenants. Look for a place that has the best blend of private property and public amenities.
7. Building Permits & Future Development
You can get info on all the new developments that are coming up or have been zoned into the region from the municipal planning development. If there are several new condos, malls or business parks going up in the area, it is possibly a good growth area.
8. Amount of Vacancies and Listings
Be careful with neighborhoods that have abnormally high amount of listings. If there are seasonal fluctuations in vacancies, determine if you can cover for them before buying the property. Just like listings, vacancy rates will help you know how successful an area will be at drawing tenants.
Rent is the most important element of your rental property hence you should know the average rent of the area. If the average rent cannot adequately cover you taxes, mortgage payment and other expenses, you should keep looking.
10. Natural Disasters
Insurance is also an expense that should be subtracted from your profits hence you should know how much it will be. If a neighborhood is prone to flooding or earthquakes, the added insurance can accumulate and eat into your rental income.
John has a real estate and property consultant for many years and helps people with their investment portfolios and wealth creation plans. His next investment focus is property for sale in Newman.