There are numerous things that most people notice when they are shopping for a rental property; the look of the exterior, how many bathrooms it has and even how it is landscaped. However, there are some less obvious features that make an investment property profitable. Without investigating these items, not only are you going into the investment blindly, but you could stand to lose a significant amount of money in the process.
The community surrounding your property can tell you a lot about what types of tenants you can expect, as well as the potential length of their lease and how often you may anticipate vacancies. For example, properties situated near colleges or universities are likely to attract students and be vacant during the summer or upon graduations, while properties within retirement communities will draw more permanent residents.
An abundance of opportunity in the area can be a great selling point, particularly if tenants are new to the area. To begin your search, go to the U.S. Bureau of Labor Statistics and check into the statistics of the area. You may also want to contact the local chamber of commerce for more detailed information. Remember: more growth equals more potential tenants.
If you are considering a property that appeals to families who have children or may have children in the future, be sure to research the schools in the neighbourhood. For many parents, the quality of the schools in the area is one of the most important factors that will influence their decision to rent or buy a home. Even the nicest houses and apartments cannot always escape the effects of a school’s bad reputation and may sit vacant for months.
It will not matter how great the community, schools or employment opportunities are if your property is next door to a known drug dealer or in the center of notorious gang activity. No one wants to live in a hot bed of criminal activity. Even if you are not aware of it when your tenants move in, they will soon learn of it and quickly inform you. So, be sure to research thoroughly via the local police department, sheriff’s office or clerk of court. Additionally, inquire about petty crime, vandalism and the frequency of police calls in the neighbourhood.
People like to get out and enjoy life, so a neighbuorhood that is close to shopping, theaters, parks, or other attractions is ideal. Peruse Local hotel lobbies and visitor centers to pick up promotional brochures and guides that will let you know where the best amenities are and which neighbourhoods provide easy access.
Just as current amenities are important to a neighbourhood’s appeal, future development is the key to its longevity. Without the prospect of future businesses, malls, condos, attractions or other growth, the area will not flourish and residents will begin to move on. Conversely, too much development can hurt your property by forcing prices up or decreasing activity-friendly green space. Contact the local municipal planning department to find out what new developments are projected or what has been zoned into the area.
If your property is in an area where countless other properties are vacant, be sure to find out why. While it could be as simple as a seasonal cycle, where tenants live elsewhere part of the year, it could just as easily be that the neighbourhood has become undesirable for some reason. Find out if the vacancies are permanent or temporary and whether the issue can be resolved before you invest. In addition, if the issue is a seasonal vacancy consider how this will affect your rental income.
Area Rental Rates
The primary reason for investing in a rental property is to secure a rental income. Therefore, knowing the average rent in the area is essential. Once you learn what the average rent is, factor in the cost of taxes and your mortgage payment; if the average rental amount will not cover these items and net a profit, keep searching.