What To Look For In A Rental Property
By Paul Esajian on November 10, 2014
Not every house you buy will be a good rental candidate. There is a lot more that goes into finding the perfect rental property than just looking to get a good deal. A great house to retail may not be the best house to rent. Rental properties require different characteristics than a house you would flip or wholesale. A rental property needs to be functional; not only for today’s market, but for five to ten years down the road. There are plenty of attributes that you need to either look for or stay far away from when looking at rental properties.
The two biggest things that all renters look for is price and location. If you are located in front of a bus stop or on a busy street, it will eliminate a large segment of would-be renters. The neighborhood will directly impact just how popular your rental property will be. The more popular the area, the higher demand and the higher rent you can charge. Conversely, if your location is undesirable, the demand won’t be there regardless of how nice your property may be. You can probably find a tenant, but you won’t get the rent you need to make it work.
There are plenty of features within the physical property that you should stay away from. Buying a property with only a single bedroom can give you a discounted purchase price on the way in, but when you look to rent you will have trouble finding a tenant. A single-family property with just one bedroom is often too big and expensive for one person and not big enough for a family. Whatever price you can get the property for is not low enough when you are stuck without a tenant. The minimum number of bedrooms you should look for is at least two, unless there are other significant features that you can sell on your property.
Amenities like a fireplace and pool may be convenient in your primary residence, but they aren’t the best for rental properties. As much as you may think this is the case, your tenant will not treat your property the same way you would treat it. This means that they probably won’t clean a fireplace out after every use and you have to make sure they are responsible enough to use it. You also would have to pay to have the chimney cleaned every year and it would be an increase on your insurance bill. The same goes with having a pool. For as nice as a pool may be in the summer it is a burden the other eight months of the year. You will have to pay to have it cleaned, maintained, insured and if you don’t want it you will have to pay to have it drained and removed. You have enough to worry about as a landlord without having a fireplace or pool in your property.
You should also look at how the house is heated. If the property is heated by a furnace and radiators, it will look dated and not be as warm as your tenants would like. If there is an oil tank in the basement, it could be an issue when you decide to sell down the road. If your tenants are unhappy, there will be constant turnover that could lead to potential vacancy issues.
A property with extensive rehab work can be a good value when you are buying but unless you know what you are doing you can get in over your head. There is a lot more that goes into a rehab that most people think. If you make the wrong decisions or do the wrong work you can do much more damage than good. There is a fine line that goes into deciding just how much you want to do with a rehab that you are looking to rent. If you do too much you may be wasting money but if you don’t do enough you won’t have the demand you need. There are also factors to consider when you decide to sell whenever that time may be. If you do just enough work now you won’t get the maximum resale value down the road. Finding a tenant for a rehab property should be the last option. Keep your rehabs separate from your rentals.
A good rental property is one that you can easily find tenants at top dollar every lease. Before you purchase a rental property, you need to look at whether or not your tenants will find your property appealing for the long haul. You can make any numbers work if you bend them enough, but you need to look at the big picture. Location, bedroom count, heating and amenities are all taken into account. A good rehab property may not make the best rental property.