When buying your first rental property, you need to be very certain it’s a good investment. You don’t want to take out a loan for a new property in this economy, only to find that the money you make off of it won’t even pay the mortgage. Do your homework, look at all of the figures and data, and exercise your common sense to ensure that you get the most out of your purchase.
Making a Smart Property Investment
Do the following to find yourself a rental property that will be a successful investment:
- Look at the comparables – this applies both to house sales and rentals in the area you’re looking to buy in. You will probably want to sell the property one day, so that data is important. Of course, looking at comparable rentals will show you just how much you could rent for and determine what your potential profits may be.
- Calculate the land-to-asset ratio – this is a subject for another time, but the bottom line is, you want most of the value of the property to be in the land, not the building. This ratio will help you get a feel for whether your prospective investment property is appreciating or depreciating.
- Pay attention to location – location always matters, both for selling and for renting a property. Consider the proximity to the closest business center, the distance to schools and shopping. Also keep the potential noise level in mind as this might be of concern to prospective tenants considering your property.
- Consider amenities – the availability of car parking, the natural light in the home (and size of the windows) and central AC are among many things tenants care about. This is in addition to true amenities, like on-site gyms, pools and more.
Once you’ve bought your property, of course, getting the right tenant in your property will have a large bearing upon your success. Using an online rental application will help you screen tenants thoroughly. The information can help to ensure that you have someone who is responsible and who will treat your property just as though it were his or her own. After all, you want it to be returned to you in top condition if you intend to rent it again or put it on the market.