Rental Property Investments
When any investor first begins to mull over the idea of acquiring a rental property it’s usually in competition with an array of other investment types—each with its inherent plusses and minuses. Some of them are new ideas (new technology company stocks; new forms of commercial exchange)—but real estate is definitely not one of those. It may not be innovative, but being a landlord has always been one of the leading sources of passive income.
What is exciting about rental property is why it has always been recognized as a sound investment. When the income from a rental property is able to pay for its own underlying mortgage, it self-propels its growing equity. The rental property’s investment value grows as the loan is paid down month by month, year after year. Added to that is any appreciation in its market value.
And with the bestrental property scenario, when rental income exceeds mortgage and other expenses, it will even throw off an extra income stream. Needless to say, choosing the right rental propertyis worth the effort! Much of that effort involves making a serious effort to map out and project values, income and expense:
Neighborhood: Consider how the overall desirability of the neighborhood is likely to affect its appeal to tenants. Are there attractive amenities like parks, shopping and entertainment venues? What do the local classified ads reveal — is the area’s vacancy rate high or low? How do rental prices compare with adjacent neighborhoods?
Project Ancillary Expenses: Determine the historical property tax rates, and what future rate changes are being proposed. Likewise, investigate insurance costs and roll both expenses into your total monthly expense projections. You want to be sure that they are low enough that you can still make a profit from the rental.
Local Dish: Expert advice from Investopedia is for prospective landlords to speak with renters as well as homeowners in the neighborhood. It’s a good point: “Renters will be far more honest about the negative aspects of the area because they have no investment in it.”
Schools: Rental homes featuring two or more bedrooms will attract families—and that means they will likely have children in school. If a school is nearby the home, it’s likely to be that much more popular with family tenants.
Crime: Crime-prone neighborhoods can have higher turnover and longer vacancy rates, so a bargain purchase price may be less of a bargain than you’d hope.
Commute: Is the property a long commute from the commercial center of town, or a quick drive? Is there public transportation? Many prospective tenants begin their housing search with their workplace as the center point. Renters will consider this before signing a lease—and you should before signing your offer!
If you are thinking of looking at rental property this summer, they’re definitely out there. Call me today to discuss some of the many opportunities!