Not all rental properties are created equal. There are two keys to keep in mind when you are hunting for a long-term rental investment. First, be clear on what you are looking for and second, be clear on the needs of prospective renters as well.
Let’s get the checklist started.
1. AN ENTICING LOCATION
You’ve heard it said over and over and over. Location, location, location. And it really is that important. A great location is truly the key to getting a good return on your investment. Not only does a better location bring in a better rental rate, it also minimizes potential vacancy rates you may experience as a landlord.
Think: good schools, good jobs, good public transportation, good parks and recreational amenities including shopping and restaurants.
Think: safety of the neighborhood. Before purchasing an investment property, check out stats about neighborhood safety including incidences of vandalism and petty crimes. Keep the long-term trends in mind.
2. NUMBERS THAT MAKE SENSE
Keep emotion out of the decision making process and lean into the numbers of the transaction.
Make a sound financial strategy before you buy, and keep in mind that you’re covering operating costs and property taxes in the equation, in addition to the average vacancy rate. Often a ‘mid-level’ purchase has better “numbers” and is a better investment than a high-profile rental.
3. LOW MAINTENANCE
Remember that high turnover rates (such as those found in student areas) increase the maintenance requirements on a property. These properties take more time and effort to maintain and to keep occupancy rates high.
Location can also play a major role with maintenance. If you prefer to not use a property management company, make sure your property is reasonably close to your home base. Otherwise the time, effort and money involved in maintenance will get old—fast.
4. APPRECIATION POTENTIAL
As an investor, think of appreciation in two ways: first is when you buy the property, and the second is when you sell it.
Consider the updates that you can do on the property that may help with appreciation. Will a new coat of paint increase the potential rent? A few cosmetic updates generally increase the profitability of your rent—especially if you do a little work yourself.
Property generally appreciates, but ideally, you want an investment that will increase in value more than the rest. Carefully examine the appeal of the property’s location. Is it on a cul-de-sac or is a new park being built around the corner? New amenities can increase property values in the area.
5. NORMAL AND PRACTICAL
Normal means practical. Normal means in decent shape, Normal means a place where people want to live.
Practical means a 3 bed/2 bath with an expected layout. Practical means good schools and nearby employment centers.
Impractical means that charming Victorian with wallpaper in every room.
Let me give you one more piece of advice: Get to know and understand the types of people you will be renting to and meet the needs of that clientele in a reasonable fashion. Seniors prefer single level living. Young families may seek nearby parks.
Bottom Line: Keep it simple. Stick to the basics. And find long-term success.