What to Consider When Buying Rental Property
If you already own rental property and you are looking to add to your real estate, or you are a novice at the real estate business, and you need some tips for buying property, then this piece is for you. There’s no doubt that investing your money into the real estate business is the right move to make. However, the returns you recover from your investment may vary. Having managed property in Los Angeles for many years, we believe we can guide you on some of the things that you need to consider before buying a rental property for huge returns. Here’s what to consider when buying rental property. Let’s get right on to it:
- Location
Of the factors to consider, the location should be pretty high on the list as it helps to evaluate the potential of the property. The location will also help establish whether there is potential for appreciation in the future. For example, the property may be around a college community which will work to your advantage. One, there’s most probably going to be a steady supply of tenants. Two, rent will probably be covered by the parents of the students. Three, you’ll be justified to demand a higher rent as the area is pretty much desirable, and there will be a great need for the apartments.
Some of the factors to look at in a neighborhood include whether it’s in an urban area or the suburbs. What are the kinds of tenants who are likely to rent the place? (Families, single people, and seniors among others) Will there be a stream of tenants throughout? Is the rental property near transportation hubs, schools, retail shops or hospitals? Is the neighborhood likely to grow in the future? All these will help you settle on the location.
- Financials
Before you evaluate the rental property’s financials, there are some things you’ll have to have a bearing on before proceeding. One, how much will you be willing to invest? Also, in the event of a loss, what is the amount that you can afford to lose? Also, if you don’t have enough money, do you know where you can get some? Finally, what is the amount that you are going to part with for the mortgage payment monthly and the interest rate?
With that out of the way, check the property’s actual expense and income sheets. Also, ensure you establish the property’s Net Operating Income (NOI). Check on the area’s vacancy rate. Finally, establish the property taxes, insurance cost, maintenance cost and its projected rent among other factors.
- Repairs
The next factor to look at is repairs. What repairs does the rental property require and what repairs are you able to finance? Repairs could range from a new coat of paint to fully rehabilitate it with new walls, plumbing, and wiring among others.
Some of the things to know about repairs are: The cost will depend on whether you will hire someone to do it or you will do it on your own. Also, repair costs will most probably cost a lot more than you had projected.
- Current market
Before buying a rental property, you have to research what is hot in real estate circles and then fit your plan into your discoveries. For example, renting a mansion in the middle of a recession might not be easy. Another factor is the resale value of the property. Will you be able to sell it after some time easily? Such property will be ideal to invest.
These are basically some of the factors to consider when looking to invest in rental property. At lapmg.com, we’ll lift the weight off your shoulder by helping you manage your rental property. Do check us out for the partnership you’ve been searching for.
