What Makes a Good Rental Property Investment?
Less than 1% of our homes were vacant in 2021.
While all the above are correct, and each element can impact your ability to get a good investment property, there are a number of things that are within your control, let’s explore exactly what to look for in a good rental property.
The Condition of the Rental Property
The investment property condition needs to be considered carefully before you decide to buy a rental property. While there are some amazing deals to be had, there are also clear warning signals that must not be ignored. Regardless of the rental potential, you need to think about if the property condition can be remedied quickly or if simple cosmetic changes can improve the appearance of the property, or if the issues will be more timely and costly to fix.
The Location of the Rental Property
This is a very important factor in establishing a good investment property, and it should be one of the top search factors if you are looking for the ideal investment property. The local neighborhood can impact many elements of rental property investments, and for this reason, you need to pay close attention to a number of factors and take time doing thorough research.
Your chosen location for an investment property will impact both the type of tenant you attract and also your rental property vacancy rates. For instance, if your property is close to a University, this could mean you will attract students as tenants, and there could also be significant vacancy rates outside of term time.
Other influences an area can have on the profitability of your investment property will come from the crime rates in an area, the local job market, and the local economy. If crime rates are high, this could also bump up the cost of insurance on the property as well.
The Rental Property Value
It goes without saying that the value of an investment property is key. If you want to know what to look for in a rental property, you need to pay close attention to the value versus what you are paying for it. Finding a good income-producing property might not always lie in buying a pre-construction investment property. Valuations are changing and are now being based on the potential income of a rental property, along with many other factors.
Rental Property Investment Market Trends
You might be able to find information about the future performance of the investment property based on trends in the area. There could be plans for future developments in the area or revitalization efforts that are scheduled to be made. Is the population in the area declining or growing? The employment market is also a key consideration.
Local Schools and Amenities
The local schools can play a crucial role in the attractiveness of a rental property. If you are considering buying a family-sized investment property, then you should review the performance of the local schools in the area. Locations with high-performing schools tend to have a better rental property market as many people will move to an area with a good school versus an area with poor schooling options.
Rental Property Taxes
Investment Property Taxes are also a key consideration. Before you decide to invest in a property, you should find out exactly how much in rental property taxes you will be expected to pay out.
Investing in Rental Properties for Beginners
Generally speaking, the best type of investment property for beginners is a condo or a single-family dwelling. Condominiums are relatively low-maintenance due to the fact there is usually an association that will be on hand to assist with any external repairs. The main drawback and a key consideration are that condos yield lower rents, and they appreciate at a far slower pace when compared with single-family properties.
If you want to attract a tenant on a longer-term contract, then a single-family home is a better option. Couples and families are more likely to be more stable than single tenants. Part of the process of buying the right investment property involves looking at different areas and choosing one which is most likely to attract that specific type of tenant. For instance, if you want to invest in property that attracts families, choosing to buy near to a school as opposed to a city would be a better option.
Because real estate can sometimes be sold at a price that is lower than the listed price, looking at investment properties that are slightly above your budget is worth considering as well. Another tip is to look for investment properties that have good projected cash flow as well as appreciation potential.
As a quick insight into what appreciation potential looks like, this is a rental property that could attract higher rental rates with just a few minor renovations or cosmetic changes. In the next section in this article, we offer some practical tips about how you can actualize the appreciation potential on a property.
An unwritten rule is to never pay more than 12x the value of the yearly rental rates you can expect to receive. Don’t forget to factor in the cost of your rental property maintenance and the general repair and upkeep of the property too. A newer investment property will most likely cost less to maintain, and you will spend less on repairs compared with buying older investment properties. It goes without saying that taking care of your own property maintenance and repairs will probably cost you less money. However, you need to be able to respond quickly and depending on where you live and your proximity to the rental property, this may or may not be the most convenient option.
How to Maximize Income on a Rental Property and Realize the Appreciation Potential
Whether coming from the standpoint of investing in rental property for beginners or for those who are seasoned property investors, the main aim for anyone who is purchasing rental properties is to make a profit. In this section, we offer a few tips that could instantly help you boost the money you can make on rental income from an investment property.
Increase the Curb Appeal
You can add instant value to your property by boosting the curb appeal. One of the first things people see when they view a rental property is the exterior. Simple jobs, such as pressure-washing the stonework, freshly painting the windows, and making sure the landscaping is taken care of can give the property a fresh, clean appearance.
If you want a good rental property, then your tenants will place high importance on storage. While it might seem trivial at first, having storage can make a real difference to the quality of life of your tenants. If you have space, adding outside storage can help your rental property stand out from others.
Update and Refresh the Woodwork
The kitchen is usually a good place to start. Without having to pay for expensive renovation works, simply refreshing the woodwork by graining and painting can transform the appearance of the kitchen. If there is any tired-looking woodwork, a simple varnish or lick of pain can make a real difference and keep the property looking fresh and updated.
In many rental properties, carpets can easily become discolored and worn. A simple and cost-effective update to laminate or vinyl can make an instant difference and for those with families or pets it presents a more attractive proposition.
The best rental properties offer an appealing outside space. Presenting this space in the most clutter-free way can add instant appeal. If you are fortunate enough to have a garden, make sure it is tended to and tidy. Any tenant will usually be required to stay on top of the garden maintenance while they occupy the property. Irrespective of how big a space you have, make the most of the presentation as this could make your investment property stand out above others.
So, without needing to spend too much money, you can instantly boost the appeal of a rental property and help your stand out above any others that are being offered in the market and which might be competing with yours. Can we help you find a perfect rental property in San Antonio, Tx?