It feels like a very sound and profitable idea to buy a property and charge rent from it on a monthly basis. However, it is not as simple as it sounds, buying a property may incur you losses and even tenant scams. When we step out in the market, we feel that all the properties seem well furnished and maintained. You should be very wise before purchasing any property because it’s a long term investment. Here are 5 ways through which you can identify if the property you are thinking to invest in is a great rental property or not.
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Proper research work is the key
The first thing you need to do before buying property is to do a complete research about the area, expected amount of profits, market rents and extra operating costs the property would incur. Just looking at the property does not ensure its positive results. You should look for consensus to learn how the population changes, available number of schools and households, crime rate, etc. Being ready for the bad days will help you stay determined. You should plan in such a way, that it doesn’t affect you much if your property remains vacant for a few months because of the changing market.
Great rental properties can be found in growing market
The property is affected by its surrounding and the monthly rental income depends upon the location of the property. If you buy property in an underdeveloped area, where there are no schools or corporate offices, it will be very difficult to attract potential tenants. Whereas you should ensure that the property resides in a developed area or an area which is developing process. Your objective should be to make at least $200 per month profit after all operating costs.
Identify potential renters
While you buy a property to have monthly rent from it, you should be aware of the kinds of renters you will expect. If you want to rent rooms to college students who are living off campus, you should invest in a property that has 4 to 5 units within the building. You will have If you plan to give your rental property to a family for a long term basis, then you need to buy a proper house accordingly. You will have to interview the tenants in person before signing any lease, so make sure you choose a worthy tenant.
If you buy your property at $250,000, then you should expect rental income of about 1% of the purchasing price, i.e. $2,500 rent per month. Deciding how much to charge for rent can be critical to keeping your property rented, and also make sure you don’t lose money.
Hire a professional property manager
If you have enough capital investment and can afford to hire a professional property manager, it would help you in identifying a great rental property. Property managers will take care of customer handling, make sure that you don’t feel overburdened by the time investment.
They might ask you for the share of 10% of the rent you will get, as their payment. If you have invested in purchasing the property and can’t afford a professional property manager, you can at least pay for one time visit and learn from them the ways you can search for a suitable property that suit your needs (and budget.)
Getting satisfaction from what you can afford
It is really important to acknowledge your potential and limits. You should be aware about how much you can afford to buy the rental property. You should not be blindly attracted to a high class property, situated in a sophisticated posh area. If you fully rely on the outward look of the property without knowing the interiors and also what you can realistically afford, it will come back to hurt you financially. You should first calculate the amount you can invest in buying the property and then think about other prospects.
Buying a great rental property can be made a bit easy if you pay attention to the aforementioned methods. Make sure you do your research work in the best way possible.
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