For those who are interested in buying a house to use as a rental property, there are a lot of things that need to be taken into account before the decision is made. After all, this is a substantial investment that you are undertaking.
You want to be one hundred percent sure that you will be able to not only recoup your investment quickly and effectively, but that you will be able to turn a profit on the property after any overhead expenditures are taken into account.
Let’s take a few minutes to look at a few of the considerations that you should keep in mind when you are buying a new rental property investment.
Location is Everything
Choosing the right location is key to the success of your rental property. Of course, at the core this comes down to two factors:
- How much are you willing to pay versus the average rental rate you will get back (this is known as rental conversion rate).
- What type of rental tenant do you want to attract.
Choosing the right neighborhood that brings you a balance of these two and the right house that fits your needs is vital. Be aware that these considerations may change drastically between properties only a block or two apart, so choose carefully.
Education is Power
We all know that education is the key to success in any regard, but in this case, what you want to be concerned with is the quality of the schools in the area that you are looking to purchase your rental property.
Surveys have shown that people look at the local schools as one of the first three things that investigate before making a rental decision. School quality can account for up to 50% of their final choice when choosing a property to rent.
If your prospective tenants are looking so heavily at the quality of the schools in the area, then, why aren’t you?
Crime Can Lock You Up
We have all heard the adage that crime doesn’t pay, but in this case it’s literal. An area that has a high crime rate can be up to 5 times more difficult to rent and can have a turnover rate of tenants as high as 12 times higher than comparable areas nearby.
Crime statistics are easy to find for areas that you are interested in buying in. Police departments can provide the information easily, but may be hesitant to do so, your better bet is to head to your local newspaper or TV station and speak to the staff crime beat reporter who will have area maps that they will be happy to share with you.
Know What Lies Beneath
So, you have found a house that you like, and that fits all of the important criteria that you have. Before you make that final purchase decision, take the extra step and get a certified home inspection. While most states and local municipalities these days require the seller to provide you with a report of a certified inspection during the purchase process, it’s a good idea to have a home inspector that you trust to come in and do another one for your own peace of mind.
Also, before you sign those papers take a moment to look around for yourself and don’t be afraid to ask about recent repairs, or major damage that the home may have had in the past, and if there are any incidents, ask for information about who made the repairs and then go speak to them after checking out their reputation with the local chamber of commerce, BBB, and any certification board in your state.
These considerations will help you make a buying decision on a home that will provide you not only a quick return on your investment, but also a steady stream of reliable income for the long term.