Beginner's Guide: 6 Ways To Determine a Good Rental Property
If you are considering buying a property and turning it into a stable ROI business, you might consider a few things before purchasing. Read through our tips below to get informed:
Have a Clear Goal in Mind
Before making any rental property investment, it’s essential you’ve got a clear goal concerning your future ventures and how big you are planning to expand this property business. Also, take into consideration the income you hope to get from your property along with the overall accomplishments you wish to achieve financially.
Make an Estimate of Your Finances
Summarizing your finances is critical to establishing how much profit you can expect to gain. When it comes to vacancy and property rates, make sure you are updated with the market rates (including the taxes) before you make any purchase. Regarding the expenses, you’ll primarily have to deal with costs of repairs, maintenance, and, of course, insurance.
Find a Location with High Potential for Profitability
If at all possible, try to find a location with a high potential for profitability. Such areas are properties near schools, malls, commercial spots, and local transportation. Another option could be locations near tourist sites, mainly if you are targeting tourists and rentals-per-day.
Invest in Renovation
Depending on the property you are buying, the chances are that renovation will be indispensable. Plus, a renovated place puts you in the driving seat of pricing, potentially allowing you to increase the initial rent rate. However, the best way to stay within your budget is to try and keep your renovation expenses to a minimum and divert that money to maintenance repairs that will spring over time.
But Avoid Fixer-Uppers
While renovation does give you the opportunity to increase the rent cost, it may also cost you too much money to start with, without any guarantee you’ll get the invested money back. On that note, try to avoid investing in fixer-uppers and choose the property that needs simple cosmetic fixes like tile, paint, or floors. Anything more significant like changing the entire plumbing and electrics system, wood, etc. may not end up being as profitable as you’d hope.
Be Smart About Your Tenant Choices
Whether you’ll be managing your property yourself or through an agency, it’s essential you properly screen the tenants that will be occupying. Why? Because that way you can be sure you are dealing with dangerous people that will be paying their rent on time, won’t demolish your space or cause any more significant problems while occupying your property (like getting you involved with the authorities or similar). Also, make a rough estimate whether the place should be rented by a single person or a family to keep the costs required for maintenance in check.
In determining an excellent rental property, consider the level of management required along with all other costs. Moreover, consider the competitors around the area of your intended property location and try to find the way to up your game. Good luck!