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How to Know if You’re Buying a Good Rental Property

Alexander House for SaleAcquiring an Alexander rental property can be a wonderful investment. But, if you want it to generate the income you desire, there are few things you need to look for in a property. Some single-family houses make better rental properties than others. There are certain qualities that investment properties with profit potential possess compared to properties that will cause you to lose money. If you’ve found a property that has these qualities, that property is certainly a great investment.

One of the most important qualities you need to look for in a rental property is the market where it is located. Generally, the profitable rental homes are those in growing real estate markets — usually where demand for rental houses is strong. The location of the property will also define details like your tenant pool and rental strategy.

Other points to look for are a strong local job market, low crime rates, and future development plans. Gather as much information as you can about nearby amenities, public transportation, and features of the property that might be trendy or in-demand. To maximize the return on your investment, make sure that you have a firm grasp of the local rental market before you make any decision.

Price and property location go hand-in-hand. A good find would be a rental property that fits your budget, and one that is priced at or below market rate. When calculating the property price, don’t forget to include things like closing costs, repairs, and insurance. Finding yourself an affordable rental property will mean you get to buy a property and keep some cash reserves for yourself.

Lowest priced properties may seem attractive, but don’t think they’re necessarily the best value for you. If the property is priced well below comparable properties in the area, it would be a good idea to figure out why. It could be that it really is a great bargain that gives you instant equity!

Something you’d also want to look at when choosing a rental property is cash flow. An excellent rental property will continuously provide a strong positive cash flow. That is to say, you should be earning a profit beyond your property expenses every month. To identify whether a property will provide positive cash flow, you’ll need to do a rental property analysis. Always incorporate property-related expenses, especially the ones usually ignored. If in all of your estimates, the cash flow remains positive, you can be optimistic that the rental property is good.

Part of calculating your numbers will unavoidably include the cost of any repairs and maintenance. All single-family houses require regular maintenance and repairs. Having said that, there are unethical sellers who might possibly cover up any major issues of the property. If you stay somewhere far from your rental property or don’t have experience with home remodeling and repair, be sure to include property management costs in your calculations.

Though it may seem enticing to try and handle your own investment property, it is more efficient and cost-effective to hire a professional property management company, such as Real Property Management Hometown, to do it for you; especially if you don’t have any prior experience. Examine all the details and do your due diligence, especially with monthly fees and other costs. Don’t forget to add these to your budget.

These qualities can act as filters for the assessment of each property, giving you a clearer view of which ones are good investments and which ones aren’t.

Already set on your next rental home but need guidance in managing? Real Property Management Hometown is here to help! Contact us online or give us a call at 501-701-4702 or 501-239-5811.

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