7 Things to Remember When Selecting a Rental Property

Despite all its advantages, becoming a successful rental property investor is not a quick and easy process. Ask your realtor for advice and guidance. And focus on the following major factors as you are search for your ideal investment property:

1. Demand for rental accommodation in the location

Look for locations where there is significant demand among renters for the type of property you will be offering. Also do your best to ascertain that this situation is expected to continue into the future. Look at the job market potential tenants will be able to access and check unemployment numbers. Areas with high unemployment might result in tenants who have difficulty in paying the rent for which you need to ask.

2. Proximity to amenities

Location, location, location! Finding good tenants will also be easier if the property is situated at a convenient distance from amenities such as schools, shopping, parks, public transportation, and hospitals. Looking for areas that have plans for significant improvement in place can also be a good choice. Just make sure to do your research. If your rental property will be appropriately sized for a family, it's especially important that you consider the schools close-by.

3. Property taxes

Consult with the municipality's assessment office to obtain the necessary property tax information for prospective properties. Also think carefully about and try to calculate how increases in property taxes could potentially interfere with your return on investment in the future. If you decide to buy a rental property that will have high property taxes, you need to make sure that it will allow you to charge enough rent and have a consistent supply of good tenants so that you still be left with a profit.

4. Starting with a single-family home might be best

If you're entirely new to rental property investment, the best way to start out might be to buy a single-family home that you can rent out. This way, you will only have one tenant and one property to deal with and monitor. For an inexperienced landlord, having more than one property might lead to inadequate management. Single-family homes also tend to have outdoor space and this is a very attractive extra for many tenants, especially those with children.

5. Consider hiring a property management company

This is especially important if you are buying a multi-family or commercial property. No matter how hard-working or diligent you might be, you're only one person and it will be very difficult (if not impossible, depending on the circumstances) for you to deal with all aspects of maintenance and other issues.

6. Remember to get property inspections

It's essential that you have potential rental properties properly inspected to avoid saddling yourself with a building that will cost you excessive expense instead of helping you turn a profit. You'll need to have a radon gas check done if the property is in a location where there is the risk of this. If the property is old, it might be necessary to do a sonar scan to ensure that there isn't an oil tank that might leak buried underneath the ground.

7. Learn about any inherited tenants

If you're purchasing a property like a duplex or apartment building, you might have inherited tenants. If so, find out about them to ensure that they will be trustworthy. You should be able to obtain all of their information (such that found in their rental applications and, for example, background checks) from the current owner.

8. If you're buying a multi-unit building, find out the capitalization rate.

If you choose to invest in a multi-unit building, you should find out its capitalization rate. A mortgage broker can help you to calculate this. Buildings with higher capitalization rates are considered better investments.

Keep Your Eye on Return on Investment

As a prospective rental property investor, your primary focus must be return on investment. Doing your research and due diligence and following the tips above will help you ensure that you consistently make a profit from your properties.

You now understand the basics of getting started in rental property investment. Remember to contact your realtor for help with the search for your perfect investment property. You'll also need to meet with a mortgage broker to find out about your options for financing.