The decision to invest in rental property is an important one. The first step in getting started is to choose the right property which will generate a sufficient amount of income for you while also requiring as little maintenance and upkeep as possible.
Ideally, it is best to develop a list which you can take with you when you begin the process of shopping around for the right rental property. This list will help to keep you on track and focused on what you should look for as well as what you should steer away from.
When looking for the right rental property, you will want to take several factors into consideration.
First, you should always consider the condition of the property. Generally, it is best to keep in mind that if you come across a property with a price that seems too good to be true, there is usually a reason why the property is priced so low. Many real estate investors like to point out the fact that you are able to determine your profit when you purchase a property.
While you may not consider selling the property for some time and will instead be renting it out, it is still important to take into consideration the cost of any necessary renovations and repairs before you make a final decision regarding whether you will purchase the property or not. After considering these factors, you may find that it will actually be less expensive to purchase a property that is in better condition, although at a higher price, than to purchase a property with a lower price that requires extensive renovations and repairs to get it ready to rent out.
Location is, of course, one of the essential elements of purchasing the right rental property as well. Keep in mind that properties which are located directly on a busy street may not be appealing to tenants who like a quiet and peaceful neighborhood. On the other hand, a property which is located near schools or parks will likely be more appealing to families.
It is also important to find out the history on the property and specifically whether the property has ever been used as a rental property. This is important due to the fact that in some cases a property can get a bad reputation. It does not take long for word to get around and once that occurs it can be difficult to get past it.
If the property is currently being used as a rental property, you also need to consider whether tenants are already on the property. If that is the case then you may need to honor the current lease with those tenants. This means that you may not be able to raise the rent until the lease has expired. There may even be state laws in some cases which could regulate how much you are able to raise the rent. Obviously, this is something that should be carefully considered. While there is the obvious advantage of already having tenants on the property, you may find later that this is actually somewhat of a bit of a disadvantage so be sure to carefully consider this factor.
Maintenance and repair needs of the property should also be taken into consideration. In the event that you are not able to maintain the property or repair it, this will translate to hiring a property manager and/or repair person. This means extra expenses which will reduce your profits. Of course, it also gives you some free time so you will have to weigh the advantages and disadvantages.
Finally, consider the price of the property. You always need to make sure that you will be able to cover not only the mortgage payment, if you have one, but also other expenses such as taxes and insurance. In the event the property is not occupied for a period of time, you will still need to meet all of those expenses so be certain that you can cover them before you obligate yourself.