Top 11 Features of a Profitable Rental Property
You’re thinking of owning a rental property, right? And you’ve probably put pen to paper to calculate how profitable the investment is, haven’t you? It’s a whole lot of profit, isn’t it? What comes next would be to pour your money on any rental property, right? No! Wrong!
There are a lot of things that could go wrong with investing in a rental property if sufficient research is not done, or if you don’t consider some important factors before investing.
First off, you would need to be objective. Investment is about achieving maximum profit, so you would have to consider other alternatives first. For instance, you could consider dividend investing vs real estate investing before making an educated decision.
And if you decide to go with real estate, investing in a rental property is one thing—anybody with enough money could do that. But investing in a profitable rental property is another thing entirely.
Top 11 Features of Profitable Rental Properties
There are some features that a rental property possesses that earmark it for profitable yields. Understanding these features and putting them into consideration would increase your chances of landing a profitable rental property investment. Here are some of the top features and criteria for buying rental property to be on the lookout for:
1. The Neighborhood
A big factor for a profitable rental will depend on the neighborhood. Desirable neighborhoods tend to have higher rental rates and little vacancy, which can be a huge plus for an investor.
If you buy a rental property near a university, there is a high probability that most of your tenants would-be students. While if you buy a rental property in a suburb, you are more likely to have families moving in. Students would most likely pay less than families and may not occupy the property year-round, but a student’s neighborhood could get filled quicker than the suburb.
Simply put, the two common trends are these:
- Neighborhoods of low-income earners usually get a horde of tenants and a lot of vacancies that quickly get filled up.
- Neighborhoods of high-income earners have fewer tenants and fewer vacancies.
2. Security of Lives and Properties
Tenants want to know that they are safe in their homes. They want to sleep at night without keeping an eye open in case of trouble. So, when you are looking to buy a rental property, consider the security and the crime rate in the area before investing your money. The local police usually have records of the crime rates of the neighborhood.
There, you would get to know the rate of petty thefts, vandalism, break-ins, and high-profile crimes. You would also know if the crime rate is on the decline, stagnating, or on the rise. Although the internet could give you an overview of these facts, the local police are more likely to have a more detailed record.
Another thing you should be interested in knowing is how often the police patrol the area. Knowing these things would place you in a better position to make good investment decisions.
3. Quality of Education
The education of their kids is always a priority for many parents. Schools that offer high-quality education are where parents strive to send their kids to.
Imagine what could happen if your rental property was in very close proximity to one of such schools. Properties that are close to good schools are most likely to have families settle there. Many families are willing to pay more in rent if their child is going to receive a great education. Therefore, the qualify of education should be taken into consideration when trying to find a profitable rental.
4. Facilities to Make Life Easier
What facilities are around the rental property? Imagine a neighborhood that has gyms, parks, restaurants, medical facilities, and the like.
The residents know that they can get the services they need a short walk down the street. This is a huge selling point and something you want to offer your tenants. Your property can fill up much quicker when you have these facilities close to your property.
Also, the availability of adequate transport facilities is another factor that you need to consider when searching for a profitable rental. People need to get around, and if they don’t have a car they won’t want to walk half the way to their destination to get on a bus or train that would take them the rest of the way.
5. Future Development
Towns that have the potential for growth attract more tenants. One place to get information on the development plans of an area is the municipal planning department.
Check out the plans for the area. If there aren’t any, the rent would most likely stagnate or even depreciate over time. But growth plans in an area tell you that the rents could soar, yielding more profit for you.
Ready to invest in real estate? If so it's important to purchase a profitable rental property and here are 11 features the property should have. #realestate #homebuying6. Friendly Property Taxes
This factor alone could go a long way in determining if your rental property would yield you a reasonable profit or not. Find out the amount of the property tax in the area so you would know how much you would have to let go of after you receive your rent. You can get the tax information of an area at the municipality’s assessment office.
7. Available and Potential Job Markets
Businesses and commercial buildings play huge roles in the profitability of a rental property. This is because businesses and big companies attract a lot of workers.
Workers always want to settle down somewhere close to their workplaces because they don’t want to drive for hours back and forth to these workplaces.
Furthermore, if big companies announce that they are setting up new offices in a neighborhood, you can be sure that that neighborhood would get an influx of new tenants. Investing in rental properties in such towns introduces you to an enormous tenant market.
8. Vacancies and Listings
If you find out that the average vacancy rate of the neighborhood is high, it is usually a sign that more people are avoiding renting apartments in the area.
When there are a lot of vacancy listings in a neighborhood, the competition among rental property owners forces them to reduce rental rates. And when there are fewer vacancy listings, there isn’t much competition for rental property owners, leading to high rents.
Usually, when you discover why people don’t want to live in those neighborhoods, you know whether or not to invest in a property in such an area.
9. Natural Disasters
Properties that are in areas prone to natural disasters are usually hard to sell or rent out. This is because tenants don’t want to sleep at night and wake up in the morning to find out that everything they have has been laid to waste by a disaster they could have hardly prevented. And the tenants aren’t the only ones that would count their losses, the property owners would be too.
The internet is a good place to find out locations that have been impacted by natural disasters in the past. If you notice a trend in a particular area, that is the red flag you need. Stop and make a U-turn.
10. Average Rent
The average rent of the area gives you an idea of what you would receive if you bought a rental property there. When you arm yourself with this information, you know if you can make a consistent profit after you deduct taxes, insurance fees, mortgage payments, and similar expenses.
11. Level of Sanitation
The sanitation of the town is another factor that contributes to a profitable rental. Tenants would avoid places that have poor sewage systems or cockroaches crawling out of their shower drains.
The general hygiene of the environment is often a plus when it comes to getting tenants to pay significant amounts for rent.
Final Thoughts
Rental property investment is often a profitable investment, but only if you know what to look for in an investment property. Be willing to put in the work to recognize profitable rental properties. Also, consider your budget so you don’t end up biting more than you can chew. Put all these together and you are on your way to having an investment that could change your life!
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Ready to invest in real estate? If so it's important to purchase a profitable rental property and here are 11 features the property should have. #realestate #homebuyingAbout the Author
Top Wellington Realtor, Michelle Gibson, wrote: “Top 11 Features Of A Profitable Rental Property”
Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.
Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.