Single-family homes tend to attract longer-term renters such as families or couples. They are more likely to be financially stable and pay the rent regularly. The simple fact that two can live almost as cheap as one (as far as food, rent, and utilities go), while still enjoying dual income. As a landlord, you want to find a property and a neighborhood that is going to attract that type of demographic.
Choose a Realtor that knows the area, trends, cash flow, and ROI potential. It’s crucial to your success. Property managers are also good sources for market rents in the area as well as vacancy. Every state has good cities, ever city has good neighborhoods, and every neighborhood has good properties, but it takes a lot of research to line up all three.
- Location – Real estate markets are constantly in flux. National real estate trends might set the overall tone, but it’s all about local conditions. In order to secure long-term rental demand, you need to make sure you’re buying properties that are conveniently close to: hospitals, universities, shopping, and entertainment. Pick properties in areas that people want to lease. Things to consider is: safety, desirability, vacancy rates, resale ability, appreciation potential, tenant quality, price, and rent ratios. These factors can be directly related to location and can directly impact your bottom-line profit.
- School Districts – People choose properties that are in good schools districts. Academics is not always the main reason as we are all taught. Many people choose areas for their sports programs.
- Age – Typically, the older a property, the more you will spend in maintenance expenses. However, a new house is not always guaranteed to have lower maintenance costs than older homes. Some newer homes are poorly constructed, whereas a lot of older homes are built very well. If a home is older you will want to complete a thorough inspection (including wiring, plumbing, roof, HVAC, Appliance and foundation)
- Condition – The condition of the property is very important. Make sure that after you complete the inspection that you put a budget together to include the items needing repair. Ensure that you account for that level of expenses in your profit calculations.
- Size – Make sure that you understand the size of property that will lease quickly in the neighborhood. You want to attract a good quality tenant. Bedrooms are very important when considering a rental property. For instance, a home that has 4 bedrooms will lease higher than a 3 bedroom home that has the same overall square feet. Same thing with bathrooms and garages. A home with 2 baths will lease higher and quicker than one with only one bath. Desirable garage space is 2.
- Rents – Rents will determine your cash flow for your rental property, so you need to know what the average rent is in the area. The average rent should be enough to cover your mortgage payment, taxes, and other expenses. If this is not the case you should not consider this property. Be sure to research the area well enough to gauge where the area will be headed in the next five years. Major development in the area could mean higher taxes in the future, which will affect your bottom line if increasing your rents is not an option.
- Pool – Investors and property managers tend to shy away from pools due to increased liability and safety issues. Insurance costs will increase which brings overall profit down.