Are you a first-time real estate investor? An investor has to cover several steps before planning to invest in real estate and actually buying a property. Choosing and managing an investment property is not an easy task. If you are a budding investor, we are here to help you with the process.
Start Your Property Search
Many people would suggest you to hire a real estate agent; however, it is only worth once you have chosen a property. It is important to consider a budget and stick with it. Your budget might vary depending upon the fact that whether you are planning to manage the property or let a company manages it for you. There are some important factors that you should consider while choosing a rental property.
How to choose a profitable rental property for investment?
- Choose a Neighborhood: The neighborhood you are going to choose will define the period of vacancies and type of tenants you would get for the property. For an instance, a rental property near a university will have vacancies frequently during the summer break and your majority of tenants would be students.
- Calculate Property Taxes: Majority of the first-time owners do not consider the property taxes and the amount of money they would lose in the form of taxes. Most of the property owners do not mind the high property taxes provided they have long-term tenants. However, it is important to get an exact idea of the taxes. You can visit the assessment office or ask the other homeowners in the community.
- Crime Rate in Community: The last thing someone would wish for is a hot spot for criminal activity. You can get an exact idea of the crime statistics of the neighborhood from the police station or the public library in the area. Have a look at the serious crime rate, vandalism rate, and recent criminal activity in the area.
- Schools in Community: Most of the families would prefer a place near to a decent school. This factor will not affect the monthly cash flow; however, it would matter at the time of selling your property. Choose a property having some decent schools in the area.
- Availability of Jobs: More than 90 percent of the people would choose a place with high job opportunities. You can get the stats from the public library or check the US Bureau of Labor Statistics. If you see an announcement of a company shifting in the vicinity, there are chances that the employees will follow through. Although, it might affect the investment cost but it is more profitable in the longer run.
- Rents and Vacancy Rates: Since you are buying a rental property, it is important to find out the average rent in the area. If you are not able to cover up for the mortgage payment, expenses, and taxes with the rent, it is best to look for another property. Check the affordability of the area before purchasing the property. Check the seasonal vacancies and vacancy rates in the area. Any seasonal fluctuations might pause the regular cash flow from the property.
- Natural Disaster and Future Developments: You need to consider any extra insurance that you would require to cover against natural disasters. The insurance cost might eat away your profits and it is important to consider this factor beforehand. It is important to understand the future development projects in the area. It will help in value appreciation of the property.
Every city has some excellent neighborhoods to invest money, but it takes a considerable amount of footwork before the process is complete. It is important to keep your expectations realistic and complete the groundwork before investing your money.