How to Find a Great Rental Investment Property
So, you have weighed the pros and cons of purchasing a rental property and have decided to embark on the journey of real estate.
That's great! We're here to help you all along the way.
Purchasing a rental or investment property can be a smart financial decision, but it's important to do your due diligence to ensure that you're making a sound investment.
So, first things first, you want to make sure that you know how to find the best rental property to purchase.
In this guide, we will be going over everything you need to know about finding a good rental property, including things you must consider and our top tips.
To begin, let's go over the most important consideration - your budget.
Determining Your Budget & Priorities
Determining your budget and priorities is an important first step in the process of finding a good rental or investment property. By setting clear financial and personal goals, you can narrow down your search and make the process of finding a property more efficient.
In this section, we will discuss how to determine your budget, the type of property you are looking for, and your long-term investment goals.
How Much Can You Afford to Spend on a Property?
The first step in determining your budget and priorities is to figure out how much you can afford to spend on a property. There are a few factors to consider when determining your budget:
Cash on hand: How much cash do you have available for a down payment and closing costs?
Debt-to-income ratio: Lenders will typically want your debt-to-income ratio to be below 43%. This ratio is calculated by dividing your total monthly debt payments by your gross monthly income.
Credit score: Your credit score will impact the interest rate you qualify for on a mortgage. The higher your credit score, the lower the interest rate you will receive.
Income: Your income will play a role in how much you can afford to spend on a property. Consider your current income and any potential for future income growth.
By considering these factors, you can get a better idea of how much you can afford to spend on a property.
What Type of Property Are You Looking For?
Once you have determined your budget, the next step is to decide on the type of property you are looking for. There are several options to consider, including:
Single-family home: Single-family homes are standalone structures that are usually used for residential purposes. These include townhouses, condos, and detached homes
Duplex or multi-family home: A duplex is a structure that is divided into two separate units, while a multi-family home has three or more units. These types of properties can be a good investment as you can generate income from multiple tenants.
Apartment complex: An apartment complex is a multi-unit building that is used for residential purposes. These properties can be a good investment as they often have a higher occupancy rate and generate a steady stream of income.
Commercial property: A commercial property is a structure that is used for business purposes. This could include office buildings, retail spaces, or industrial warehouses.
By considering the type of property that aligns with your budget and investment goals, you can narrow down your search and focus on properties that are a good fit.
Consider Your Long-Term Investment Goals
Before you begin the process of searching for a rental or investment property, it's important to consider your long-term investment goals. There are two main types of investment goals to consider: cash flow and appreciation.
Cash flow: Cash flow refers to the yearly or monthly rental income generated from a rental property. If your primary goal is to generate a steady stream of income from your investment, you may want to focus on properties that have a high occupancy rate and generate a strong cash flow.
Appreciation: Appreciation refers to the increase in value of a property over time. If your primary goal is to maximize appreciation, you may want to focus on properties in areas with a high potential for growth and appreciation.
After considering all of these factors and straightening your budget and priorities, you are ready to move on to the next step - deciding on the location of your rental property.
Determining The Location Of Your Rental Property
The location of your rental property is an important consideration in the process of finding a good investment. By conducting thorough research on potential locations, you can increase your chances of success as a landlord or investor.
In this section, we will discuss three key questions to ask when determining the location of your rental property.
Does It Have A Healthy Real Estate Market?\
One of the first factors to consider when determining the location of your rental property is the profitability of the real estate market.
Look for areas with a high demand for rental properties and a low vacancy rate. Some key indicators of a profitable real estate market include:
Strong population growth: Areas with a growing population are more likely to have a strong demand for rental properties.
High median home prices: Higher median home prices can indicate a strong demand for housing in the area and a higher potential for appreciation in property values.
Low vacancy rates: A low vacancy rate can indicate a strong demand for rental properties in the area.
All of these factors work together to create a potentially profitable real estate market that may be the best location for your rental property.
Will You Be Able To Manage It From Your Location?
In addition to the profitability of the real estate market, it's important to consider whether you will be able to manage the property from a distance or if you will need to be local to the property. Here are a few factors to consider:
Distance from your current location: If you will be managing the property from a distance, consider the logistics of commuting to the property to collect rent, conduct inspections, screen potential tenants, protect the security deposit, and other necessary tasks.
Reliability of property management companies: If you will be using a property management company, research their reputation and reliability to ensure that they will be able to effectively manage the property on your behalf.
Security of the property: If you will be managing the property from a distance, consider the security of the property and whether you will need to implement additional measures to protect the property while you are away.
By considering your ability to manage the property in a given location, you can ensure that you are able to effectively oversee the property and maximize your return on investment.
Are There Amenities Nearby?
When looking for a place to rent, most potential renters will favor a property that is located somewhere with a healthy numbers of amenities around it.
These amenities could include:
- Grocery Stores
- Fitness Centers
- Theme Parks
…and anything else that could benefit renters.
These features are especially important for long term rentals, as they will become a part of the neighborhood for many years.
Thus, it is crucial to make sure that the location of your rental property has at least a few of the amenities mentioned, or it may be difficult to find quality tenants.
What Do the Statistics Look Like?
In this section, we will discuss four key statistics to consider when determining the location of your rental property: the crime rate, population growth, average rent, and unemployment rate.
The crime rate of an area can impact the demand for rental properties and may also increase insurance and security costs. It's important to research the crime rate of a potential location to ensure that it is a safe area for tenants.
Also, areas with lower crime rates may make the tenant screening process easier, as you may not encounter as many criminal records.
You can find crime statistics for an area by contacting the local police department or by using online resources such as CrimeReports.com.
Areas with a growing population are more likely to have a strong demand for rental properties. Look for locations with a high population growth rate, as this can indicate a strong demand for housing in the area.
You can find population data for an area by contacting the local government or by using online resources such as the United States Census Bureau.
Research the average rent for properties in the area to determine the potential for rental income. Look for areas with a high average rent, as this can indicate a strong demand for rental properties.
You can find rental data for an area by contacting a local real estate agent or by using online resources such as Zillow or RentJungle.
The unemployment rate of an area can impact the demand for rental properties. Look for areas with a low unemployment rate, as this can indicate a strong economy and a higher potential for rental income.
You can find unemployment data for an area by contacting the local government or by using online resources such as the Bureau of Labor Statistics.
After determining the ideal location where you would like to purchase your rental property, it's time to get into the hard part - actually finding the property.
Searching For Rental Properties
So, you have decided on your budget, the kind of rental property you want, and the location where you want it. The last thing that you need to do is finally find the property.
Below, we will outline the best way to find the perfect rental property.
Rental Listing Sites
Rental listing sites are a convenient and efficient way to search for rental properties. Some popular online resources:
Zillow: This is a popular website that allows you to search for rental properties by location, price, and other factors. It is useful because it has a large database of properties and allows you to easily compare prices and amenities.
Apartments.com: This website is specifically geared towards finding apartments for rent. It allows you to search through millions of rental listings and also provides reviews and ratings of properties.
Realtor.com: This website is another popular resource for finding rental properties. It allows you to search for homes, apartments, and other types of rentals, and provides detailed information about each property, including photos and descriptions.
Rent.com: This website is another popular resource for finding rental houses and apartments. It allows you to search by location, price, and other factors, and provides detailed information about each property.
Using these resources will likely grant you your best shot at finding the perfect rental property. However, there are still other ways to accomplish this, which we will discuss below.
Utilizing a Real Estate Agent
Utilizing the services of a real estate agent can be a helpful way to search for rental properties. Some benefits of using a real estate agent or property management company include:
Professional expertise: Real estate agents have extensive knowledge of the local real estate market and can help you find properties that meet your needs and budget. And, since they find houses and apartments professionally, you will probably get the job done much faster.
Access to a wider range of properties: Real estate agents often have access to a wider range of properties that may not be listed on public websites.
Simplified process: Working with a real estate agent can streamline the process of finding a rental property, as they handle much of the legwork for you. They can even help you through the rest of the process, up to the lease-signing stage.
While there may be a cost associated with using real estate agents or property managers, the convenience and expertise they provide may be worth the investment.
Attending Local Real Estate Auctions or Investor Meetings
Another way to search for rental properties is by attending local real estate auctions or investor meetings. Some benefits of this approach include:
Opportunity to find deals: Auctions and investor meetings can provide an opportunity to find properties at a discounted price.
Networking opportunities: Attending auctions and investor meetings can provide an opportunity to network with other landlords and investors and learn about potential investment opportunities.
Local knowledge: Attending auctions and investor meetings can give you insight into the local real estate market and help you find properties that meet your needs and budget.
While attending auctions and investor meetings may require a time commitment, it can be a valuable way to search for rental properties.
And you're done!
After following all of those steps, we are sure that you have found the rental home of your dreams.
If you're still struggling, however, don't worry.
Below, we'll be outlining our top 5 tips to find the best rental properties and make sure that you make the best investment possible.
Top 4 Tips For Finding Rental Properties
As you can probably tell from reading the rest of this guide, finding a rental property is no easy task.
To help ease the pain, however, we have provided some of our top tips to streamline the rental property finding process and help you find your perfect investment.
Research the Local Real Estate Market and Trends
One of the key factors to consider when searching for a rental or investment property is the demand for rentals in the area.
Look for properties in areas with a high demand for rentals, as this can increase your chances of finding a tenant and maximizing your return on investment. Some indicators of a strong rental market include:
- Strong population growth
- High median home prices
- Low vacancy rates
By focusing on areas with high rental demand, you can be sure that your investment will be as profitable as possible.
Consider the Property's Age and Condition
The age and condition of a property can impact its maintenance and repair costs, as well as its potential for appreciation. Here are a few factors to consider:
Age of the property: Older properties may require more maintenance and repairs, which can impact your budget and cash flow. On the other hand, newer properties may be more expensive to purchase but may have lower maintenance and repair costs.
Condition of the property: Consider the overall condition of the property, including the condition of the roof, plumbing, electrical system, and other important systems. The cost of repairs and updates can impact your budget and cash flow.
Considering these characteristics can help you make sure that you are not choosing a rental property that will only serve to break your bank.
Found the perfect property but it's just over your budget?
To negotiate a lower asking price on a rental property, it can be helpful to do your homework and research comparable properties in the area to understand the market value.
You can then make a lower initial offer and be willing to walk away if the seller is not willing to meet your price. If the seller is motivated to sell quickly, you may be able to negotiate a lower price by offering to close the deal faster.
Additionally, if the property needs significant repairs or updates, you can try to negotiate a lower price by pointing out the work that needs to be done.
Take Your Time
It is crucial to take your time during the process of finding the perfect investment property.
This will help you make a good investment, avoid making costly mistakes, minimize risk, and find the best financing options.
Rental properties are a long-term investment and require a large upfront investment, so it is important to carefully consider all of your options.
This includes researching the local rental market, the condition of the property, and any potential issues that could arise in the future, as well as exploring various financing options.
Find Your Next Property
Finding the perfect investment rental property requires careful research and consideration of multiple factors.
By taking the time to thoroughly evaluate all of these elements, rental property buyers can increase their chances of making a successful investment.
Remember, rental properties are a long-term investment, so it is worth taking the time to find the perfect property and deal to ensure you're profitable.