Before you buy a house or multiplex it’s always a good idea to consider it’s potential (and features) for making it a profitable rental property.
You want your rental property to have all the right qualities to bring in the highest amount of rent possible. Avoid properties with things that will eat up profits like tight rent control or very high insurance premiums.
Especially if you’re not putting down a lot of money to purchase it!
But, what about the home you already live in? Will it make a good rental property? In this article, well cover that too.
Let’s review some ideas to help judge whether a particular property might make a good rental or not.
Qualities & Features Of A Great Rental Property
1) Low Maintenance Yard
A yard and garden with little maintenance are ideal. You’ll want to seriously consider hiring a gardener to take care of the yard maintenance. As tempting as it might be to have the tenant take care of things, I would not advise it. This hardly ever works out and the yard will most likely be neglected.
Save the hassle and just include the cost of the gardener in the rent.
The smaller the layout, or fewer weeds and dirt you have, the better. That means cheaper watering costs, cheaper gardening costs, etc.
2) Forget About Luxurious Amenities
The inside of your home or unit should be clean, modern, but not overly luxurious. Most tenants don’t care about the extras such as high-end kitchen cabinets, flooring, or paint. Those expensive items will end up with extended wear and tear, then a higher price for repairing or replacing them too!
If you can get higher rent by making things luxurious, go for it! Just don’t overdo things.
3) Stay Far Away From Busy Streets, Trains, Freeways, Power Lines, Or Refineries
In a big city, some things are just unavoidable. Try to minimize your distance from super busy streets, trains, freeways, big power lines or refineries!
Being far away will help maintain good property values, demand higher rent and be attractive for renters who want peace and quiet.
4) Forget A Condo, Buy A Single Family Home or Multi-plex Instead
Single Family Homes and Multi-Plex properties will always appreciate better in value than a condo. Not only will the property value be worth more over the years, but you’ll also be able to get more in monthly rent as well.
The last perk of not owning a condo is you will not have to deal with a Home Owners Association! Sometimes an HOA can restrict you from renting out your unit if a new rule or regulation were to be passed by the board.
5) Quality Of Neighborhood
If you want to rent to a quality tenant, you’ll need a quality neighborhood. If you drive or walk down the street at night would you feel safe? Would you be OK with your kids playing football on the front lawn? Think of all the things that make a quality neighborhood. Then think about the kind of tenant that will attract.
6) Consider Avoiding Rent Control, High Property Taxes, HOA Fees, and High Insurance Costs
You want to have a rental property with as much cash flow as possible. Rent control can reduce the income potential of getting higher rents if your holding costs go up.
Super high Property taxes, HOA fees, and Insurance costs are all things that can and will eventually go up even higher. This added cost will eat into your cash flow which should be used for paying your mortgage payment. Or setting extra money aside for an emergency fund to use for property repairs or vacancies.
Ideally, the rental property has no rent control and no HOA fees. It will also have low property taxes and affordable insurance premiums. However, these are just considerations. Finding a property with all of these great economic qualities could be an impossible find in the real world. Every deal is different so weigh out the pros and cons of your decision to make a purchase or to pass on it. Crunch the real world numbers first, if they work, they work.
7) Located By Highly Rated Public Schools
Good or bad schools will affect the people, families, and how much you get in rent. Plus the overall appreciation of the property won’t be as much either. I recommend to always buy in an area that has good rated public schools. Check out the website called Great Schools for more information about finding school ratings in your area. If private school is an option, it’s possible that public schools may not be a consideration for some.
8) Future Development Around The Neighborhood or City
Any city or neighborhood that has future development plans for building and improving the local area will be great for real estate appreciation. New parks, malls, gyms, movie theaters, train stations, condo’s, and office-space are all great indications that the city is moving in the right direction. You can learn about the various projects from a city’s website. Sometimes they’ll even do local marketing with signs and fliers etc.
A good rental property has to be cash flow positive! If it’s not, it can be a landlord’s worst financial nightmare. It will always be financially tight in the beginning, but over time it should get easier.
One day, you’ll be able to find a real estate property with good economic qualities. That will show off its potential for property and rental income appreciation.
Then, you can figure out if it’s a good deal or not.