To buy, or not to buy? Purchasing a rental property can be very lucrative if you choose wisely. Here are the most crucial factors that will influence your decision.
For first-time investors, single-family homes or condominiums are generally the safest bet.
Single-family homes attract couples and families, who are more likely to become long-term renters and thus ensure stability on your end.
Condominiums are great because they have homeowner’s associations that take care of the majority of external repairs. However, condos do not offer the same degree of independence as single-family homes do, and rents are often lower in comparison.
You’ll definitely need to assess whether or not high property taxes are worth the investment by considering the likelihood of having long-term tenants. Check in with homeowners in the neighborhood and the city’s assessment office to get a more accurate idea of how much you’ll be expected to pay.
Schools: A property that’s close to a university may very well mean short-term, student renters. It’s usually better if there are elementary, middle, and high schools nearby for long-term renters who have or are considering children.
Crime: Ask the police department or local library about crime statistics in the neighborhood, specifically vandalism rates, violent crimes, petty crimes, and police presence.
Employment: Tenants are usually drawn more towards neighborhoods with plenty of job opportunities. Check the U.S. Bureau of Labor Statistics to assess employment growth, or even check the local library.
Amenities: Figure out if the potential neighborhood has movie theatres, shopping malls, gyms, public transportation, parks, or tourist attractions.
Figure out what the average rent in the neighborhood is, and whether or not charging that will be enough to cover mortgage payment, taxes, and insurance.
If you’re considering an area prone to flooding or earthquakes, you may need to pay extra insurance—which can get expensive.
Ask the municipal planning department about any new development that has been zoned in the neighborhood. More business parks or malls may help attract renters to the area, but new housing may turn out to be competition.