The financially savvy individual knows that real estate can be one of the most profitable ways to invest one’s savings. People will always need a place to live, and land is a finite resource. If you’re looking to buy and invest in homes as rental properties, then you’ve got the right idea. Even when the economy is down, rental owners still make good income. If this is your first time buying a home to rent out, there are several things that you need to look for in order to buy the right kind of home.
A Good Neighborhood
A renter wants to feel safe when they move into your home. While providing strong locks and solid doors can help, renters want to live in a good neighborhood. When you’re considering purchasing a home, check the local crime rate. You will find that there is some crime, this is normal. What you want to know is if there is a higher crime rate near the home, you’re considering than in other neighborhoods. If there is, you should probably look elsewhere.
A good neighborhood is more than just a safe one. You also want to purchase a home in a neighborhood that is well cared for. In a clean and tidy neighborhood, the home that you purchase is bound to continue to increase in value over the long term. This is very important for successful real estate investment.
Consider how big the backyard is. If you are primarily interested in capital gains on your investment properties, then a big yard is a good thing. It provides you plenty of space to make improvements that increase the value of your home. Unfortunately, a larger yard will also come with larger maintenance costs. Also keep in mind that a larger yard usually comes with a larger price tag on the home.
However, if renting is a big part of your plan, a large yard may or may not be a good thing. If you are renting primarily to families, a big yard is an attractive feature that you can use to increase the rental price. On the other hand, if you are renting primarily to college students in a college town, they are not likely to be as interested in a large yard and won’t be willing to pay a higher price for one.
A Modern Kitchen and Bathroom
The kitchen and bathroom are some of the most important rooms in the home. Depending on the style, they can make the home look new or old. If you are experienced in home renovation, then it can be worth your while to buy a house with an old kitchen and bathroom and then fix it up. If you aren’t, these two rooms can be a money trap. You’ll have a much harder time selling or renting a home at a good price until these two rooms are fixed. If you have to contract out this work, you’ll have a hard time making that money back.
Look for outdoor amenities built into the home, like a deck. Decks can include many features that will attract renters to your property. For example, if the deck is large enough for outdoor grilling and dining, this can be a huge selling point for both family and student renters. For a family, this is a great place to have a family BBQ. For college students, the deck will be a great place for parties. Other great outdoor amenities are hot tubs, storage sheds, and swing sets.
A mother-in-law apartment is an amazing feature to have if this is your first rental property. A mother-in-law apartment is a section of the house that can be closed off from the rest of the house to form an apartment. Typically, these apartments are in the basement or above the garage. This feature can allow you to live in the house you purchase and rent it out at the same time. If you charge a high enough amount, your renter could end up paying your whole mortgage.
Updated AC and Heating
AC and heating are often overlooked when investors buy investment properties. But this oversight can be very dangerous to your finances. If either of these systems go out, you’ll have some very upset renters and you’ll need to replace them immediately. Of course, these expenses are just part of owning a home, but ideally, these costs should come a few years down the road. After a few years, you’ll have some money set aside from rent payments to cover in depth repairs. But if those repairs come up right away, then they’ll be a much bigger strain on your finances.
Unless you want an indoor swimming pool full of muck, you want to check that the home has quality plumbing before buying. The first thing you should check are the toilets. Make sure that they don’t rock when you sit down, check for signs of leaking like warping or discoloration at the base. Make sure they flush well. The next big thing you should check is the water heater. If it’s older than 10 years, it should probably be replaced. After that, check the water pressure by turning on all the facets at once. And finally, check the crawl space and basements. This might not be a very pleasant task, but it’s important. In the crawl space and basement, you’ll be able to see if there are signs of water damage, leaking pipes, or poorly made repairs.
The proximity of your rental property to quality schools is often overlooked. Parents want their kids to succeed in life, so they’ll look for homes that are in the boundaries of good schools. If the school near your home isn’t very good, you may have a hard time renting to families. If you are in a college town, then the closer you are to campus, the more popular your home will be with students.
Investing in real estate is a great way to start building your financial wealth. Those that haven’t done it, may try to discourage you by warning of the “dangers” and “high risk.” While you shouldn’t entirely ignore them, you shouldn’t pay too much attention to those that have never actually participated in real estate investment. Instead, do what you can to lower your risk and increase your likelihood of success by educating yourself through reading articles like this one.
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