Are you looking to buy a rental home to boost your income? That’s one of the best things you could do with your investment. Investment properties can be extremely rewarding if you make the right choice. However, investing in a rental property isn’t as simple as it might sound here.
To help you invest in the best residential rental property, you must consider the following ten premium factors.
Top 10 Features to Consider When Investing in a Rental Home
Be a first-time investor or a pro, always consider these factors to make a worthy investment:
The neighbourhood you choose to invest in a rental property will decide the vacancy rate and the type of tenant. For example, buying a rental home in the downtown area will set high rents. Here, you could attract millennials and those working in the same region. On the other hand, if you buy near a university, your target audience could be students where you might struggle to fill vacancies every summer.
No matter which type of residential property you buy, you will have to pay property taxes. Property tax is an expense you need to consider when investing. That said, high property taxes doesn’t always mean a wrong investment decision. Some neighbourhoods that attract long-term tenants can also have high property tax rates. While you’ll be paying high taxes, you wouldn’t have to worry about filling the vacancy now and then.
Families with children are always on the hunt to find rental homes with good nearby schools. The closer you buy a house to good schools, the higher rental you may expect. Although, purchasing a rental home close to schools will also cost you more. Here, you can compare the financial benefit you may get from buying a house close to schools.
Nobody wants to live in a dangerous neighbourhood. When you select an area to buy a house, check the crime rate with the local authority. Also, ask what the security measures the local community takes to avoid any criminal activity are.
That’s one of the major factors deciding the flow of home prices. If there are many employment opportunities in the area, more people will move towards the area, expecting a higher house rental. The opposite stands true for areas with low employment opportunities.
If you hear of a big venture starting in the area, you could expect a future flow of people, which means the site can offer you higher rentals. You can apply a similar rule for regions with higher business opportunities.
Buying a house in a developing neighbourhood could be wise, but investing in a rental property isn’t. So when you’re investing in a residential property, make sure the community has everything to offer, such as parks, restaurants, gyms, movie theatres, public transportation links, and all the other perks that attract renters.
Local development authorities have plans for future development in the area. If you could get a hold on to those, it would be easy to decide where you must invest.
Number of Listings
That isn’t a very reliable investment analysis tool, but it still could give you some hints. Before you buy a rental property, check out the rental listings in that area. A higher number of listings could have a seasonal impact. But, it could also mean a decline in the number of tenants (which could be due to several reasons).
You may further expand this analysis by looking at the listing period; the longer the listing period, the less favourable it would be for investment.
Average rental is usually the most critical factor for investors. But who could ensure that the rentals would always remain in your favour? Recall the COVID-19 pandemic time. People were so scared of the virus that they tried everything to move out of close communities (such as condominiums) to relocate to spacious homes. Not only condo prices started falling, but rentals also did.
That said, rentals play an important part when planning to invest in a residential property. Know the average rental income and compare it with the mortgage payment, taxes, and other expenses. But don’t rely heavily on this single factor alone.
An area with high natural disaster rates could mean high insurance amounts and fewer tenants. The first thing I would suggest is to avoid investing in such an area. But if you must, compare the benefits you would get from the rental property.
The Bottom Line
Many first-time investors do not incorporate the above-outlined factors when planning to buy an investment property. Now you have this list, do look out for the property that gives you the best, not for a year or two but for a much longer time.