Investing in a rental property can be an exciting and rewarding experience. With a successful rental, you’ll be able to enjoy a regular monthly income, numerous tax deductions, and property value appreciation, among other things.
But just like any other investment, rental properties don’t come without their fair share of risks. The real estate industry can throw plenty of obstacles your way that can obliterate your returns.
Continue reading for our best tips on how to choose a profitable rental investment.
Buy In The Right Location
Location can make or break your investment’s success. If you buy in the right location, you’ll have high chances of landing a great tenant, enjoying low vacancy rates, and even getting to charge higher rent.
A good location for a real estate location boils down to a few key things, such as convenience, desirability, and growth potential.
Do Research On Property Taxes
To make your rental investment profitable, you’ll need to keep expenses in check. One such expense is property tax. These will vary from one location to another.
While high property taxes may not necessarily be a bad thing, be sure to do your research. For instance, are the high taxes due to the appealing location? If so, then that shouldn’t be a deal breaker. An appealing location will have a higher demand for rentals and have high appreciation values, among other things.
That said, there are also less appealing locations that are heavily taxed. These are the ones to avoid. A great place to look at a location’s tax information is a municipality’s assessment office. You may also want to ask about probable future tax increments.
Check The Quality Of The School District
Are you going to be targeting families with your property marketing? If so, you’ll want to check the quality of the local schools. Families with school-going children often prioritize living in a good school district.
Another advantage that a good school district can offer is a higher potential for reliable, on-time rental payments. Families with school-going children tend to stay put for a lengthy period to avoid disrupting their children’s education.
Check The Crime Rates
A hot spot for criminal activity is a red flag for potential tenants. High-quality tenants want to live in a safe neighborhood with little to no crime. A safe neighborhood is free from crime, has a strong community sense, and is well-maintained.
For safety data, check online and municipal sites. Other useful places include the public library and the local police. Check vandalism rates for both petty and serious crimes. You may also want to check the trends of criminal activity.
Check The Job Market
A growing job market is a good indicator of a strong real estate market. Growing job opportunities will attract more people to the area, leading to increased rental demand. A visit to a local library or checking online with the U.S. Bureau of Labor Statistics should help you get useful insights.
Find Out About Insurance
Insuring your property is key when renting it out. You’ll have peace of mind knowing your property is financially insured against potential damage and liabilities.
Insurance rates will vary from one location to the other. This will depend on the frequency of certain risks, such as flooding, earthquakes, and other natural disasters.
If you are planning to buy a property where such disasters are commonplace, your insurance rates will be higher than in areas where they are not. This could potentially eat away at your rental income.
According to SimplyInsurance.com, the average monthly cost of landlord insurance in Oregon is $74. This is in contrast to states like Louisiana, North Dakota, Florida, and Delaware, where insurance rates can go as high as $200 per month. The national average is about $100.
Know The Area’s Average Rent
Find out how much renters pay for similar units in the area. You can do the research in several ways. You could interview area landlords, contact a property management company, or go online to find out via popular listing sites.
Once you have a rough average, determine whether the investment is going to be worthwhile or not. Factor in expenses such as taxes, mortgage payments, and repairs and maintenance.
Know What Type Of Rental Property Type To Invest In
A single-family dwelling is usually ideal for first-time investors. These are low-maintenance and often tend to attract long-term tenants.
Being a landlord comes with a ton of responsibilities. From rental advertising, to tenant screening, to repairs and maintenance. This can be stressful to take care of for one property, and even more so with multiple. It’s good for investors to start small and build up to avoid getting overwhelmed.
Consider Hiring A Property Management Expert
Real estate can be a risky industry for lone investors. One wrong move can severely impact your bottom line. This is where a property management company comes in!
Property managers can do all the heavy lifting for you as you focus on other important things. They will advise you on a range of important things like the location, rental prices, and later manage the day to day processes of the property on your behalf.
Conclusion
Due diligence is key when it comes to real estate investing. It can make the difference between investing in a money pit and a cash cow. However, the footwork and research required to line up everything correctly is often a lot.
Luckily for you, Campus Connection Property Management has you covered. We have a thorough understanding of the Eugene rental market and are prepared to help you! We have decades of experience and are a solution for savvy investors in the Eugene/Springfield area. Get in touch today!
