If you’re looking into investing in your first rental home – or even if it’s your 10th – there are a few things that you should consider before you put in a bid. Below are the five most important questions to ask yourself before you decide to buy a rental home.
Who Would be the Tenant?
Before you decide to buy, figure out who you’re going to be renting the home to. Is it a four-bedroom house? You’ll probably be renting to a family with children or a group of young adults acting as roommates. Is it a small starter home? Your tenants will most likely be a couple or even a single parent with one or two children. Once you have your answer, look around the neighborhood and determine whether that particular audience would be excited to live there. If not, you might want to reconsider.
What Upgrades Does It Need?
The price you pay for a property is just one part of the equation. The money you’ll need to invest to bring it up to your ideal is another. Figure out what the people in the local area expect from their homes, then compare that to the features the home already has. If the margin is narrow, it may not be worth your investment. However, if you can make the necessary improvements and still turn a big profit, it may be a great opportunity.
What is the Crime Rate in the Area?
More people than ever before are becoming increasingly aware of the crime rates in their neighborhoods. Crime is up across the country, and everyone wants to feel safe and secure at home. It’s easy enough to determine what crime is like in a particular neighborhood with a wide range of tools, and savvy real estate agents should be able to provide that info, too. In some cases, going the extra mile to install a security system for your tenants can help you collect higher rent, especially if crime in the area is still low, but on the rise.
How Does the Asking Price Compare to the Market Value?
Most of the time, people are going to sell their homes at or slightly above the market value to leave some room for negotiation. However, there are some rare cases when sellers may just be in a hurry to close and get the burden of ownership off their shoulders. Always take the time to compare the asking price to the market value, and if it seems too low, do a little extra research to find out why. It may be the deal of a lifetime, or it may be a money pit in the waiting.
What’s Nearby?
Finally, part of renting out a home or apartment is making the property seem attractive to tenants. The only way to do that is to play up the things that are nearby. First, what’s in walking distance? Is there a corner store? Maybe a grocery store? Which churches are in a five-mile radius? How close is the nicest park in town? How far is it from the city’s “downtown” area? What are schools like? Where’s the hospital, the fire station, and the police station? These are things that matter to potential tenants, so it’s important to ask these questions before you buy.
A good rental home is one that you can buy for an excellent price, then refurbish for an affordable price. However, before you can consider it a good investment, you need to make sure it’s attractive to the renters in the area. These questions are designed to help you make the best and most profitable choices in your real estate investing journey.