Real estate is one of the most rewarding investments you can make. With so many factors to consider, evaluating houses and condominiums for sale can be nerve-wracking for a first-time investor.
What defines good income from a rental property will depend on each investor’s goals. But forward-thinking investors pay particular attention to the following factors:
Strategic location
Your property’s location can make or break its earning potential. Your vacancy rate and type of tenants will depend on the city and neighborhood in which you buy your property. When assessing the location, every investor must consider the following elements:
• Schools
If your property is situated near local schools and universities, students will likely fill your pool of potential tenants. It will be easy to find tenants once the academic calendar starts but vacancies to shoot up during the summer. While consistent monthly cash flow may be a problem, having quality schools nearby can increase the overall value of your property once you decide to sell it. Without any good schools, the long-term value of your investment may suffer.
• Job Market
Areas with abundant employment opportunities attract more tenants. Check the diversity of job availability in your locale by viewing online job marketplaces, or inquiring directly through the U.S. Bureau of Labor Statistics (BLS).
• Amenities
Explore the entire neighborhood and take note of public and private establishments that can attract renters. These include malls, parks, gyms, restaurants, movie theaters, pharmacies, and hospitals. The availability of public transportation is also important. Most City Halls offer maps and promotional tours and literature that will give you a better idea of not only the layout of your neighborhood, but also the kind of lifestyle and culture it offers.
• Criminal activity
A high crime rate is an absolute red flag. No tenant wants to live in an area where his or her safety is at risk. Visit the local police station or public library to check the neighborhood’s history of criminal activity. Pay attention to both serious and petty crimes including theft and vandalism. You can also inquire about police presence and contribution in the area.
Stable condition
Pre-owned properties are significantly cheaper and more negotiable than new ones. If you’re targeting a pre-owned property, consider age, quality of the building, and possible remodel costs. Do your research and conduct thorough inspections of the property’s wiring, plumbing, and roofing systems prior to purchase.
Consult a trusted architect or an engineer to check its structural integrity and be alert for signs of pest infestation. If you’re not careful, the money you saved from buying a pre-owned property might just go to costly repairs and maintenance.
Read More: It’s Free Real Estate: Managing Your Rental Property
Maximum growth potential
Successful property investment is one that generates maximum profit and appreciation potential. When assessing appreciation potential, focus on properties that, after a few renovations, will attract tenants who are willing to pay higher rental rates. This will also boost the property’s value once you choose to sell it in the future.
With proper research and planning, a great rental property can provide you with a steady flow of revenue. Investing in income property also lets you decide which tenant you’ll rent to, how much you’ll charge, and when your space will be available. Unlike stocks or bonds, investing in real estate allows you to personally control the growth and movement of your money.
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