Investing in a residential rental property can be a great and profitable way to boost your investment portfolio. However, real estate is a tough business. For this reason, it’s important to do detailed research on the pros and cons of real estate investing before buying your first property.
It is important to start your search for property before bringing an agent into the picture, as they may pressure you to an investment that is not best suited for you. During this preliminary research, you’ll want to narrow down several key characteristics you are looking for in your property, such as size, location and amenities. In this article, we will discuss 5 key features to look for to ensure that your real estate investment is a profitable one.
1. Know Your Neighborhood
The location of your property is one of the most important things to consider. Knowing which type of neighborhood you are investing in will determine the type of tenants you will attract, as well as your vacancy rates. For example, if your property is near a university, then you should expect students to make up a large majority of your potential tenants, and also that you will have high rates of vacancy during summer months.
No one wants to live in a crime-riddled neighborhood, so make sure to check out the local police department or government statistics on crime in areas near your potential property. Also, consider whether crime has been increasing or decreasing in the area, and the type of crimes committed.
Before you consider investing, take a tour of the neighborhood and consider what might attract potential tenants. Be on the lookout for parks, restaurants, fitness centers, supermarkets, movie theatres, and public transportation. If the area you invest in has an abundance of activities for tenants to enjoy, it is much more likely that your property will attract residents and generate profit.
Landlords should be aware of the number of listings and vacancies in neighborhoods they consider investing in. A high number of vacancies could indicate a number of things including a neighborhood that is in decline, and this will force landlords to lower rent, thus decreasing rental income. A low number of vacancies would allow rents to be raised, increasing income.
5. Property Taxes
Property taxes can vary widely depending on the are you are looking to invest in. Before investing in a property, you will want to research the local tax rates and determine how much money you will be losing to taxes. While high property taxes are not always a bad thing, especially if you are in a great neighborhood that will attract long term tenants, but there are unappealing neighborhoods with high taxes as well.