Article produced in collaboration with Moving Waldo
Buying a rental property is an excellent long-term investment. To find the right property for you, it is important to consider a few factors first. Here is what to consider when buying a rental property.
1. The rental property is located in an ideal and desirable location
A rental property in an ideal and desirable location is not only beneficial to you, but also to your tenants. Leasing will be easier, and you will have a better rate of tenants renting long term. A location is considered ideal if there are good schools and parks nearby with a good Walk Score and a good safety score.
2. The repairs to be made to the rental property are minor
Despite its low price, a building that needs major repairs requires time and money. The time you put into the repairs could lose you money. To determine whether the repairs are minor or major, it is essential to hire a qualified home inspector.
3. The building has supplemental income opportunities
Does the basement of the building you are visiting have washer/dryer hookups? You could install one or more washers and dryers that will give you an extra income. Or better yet, is there a large open space at the entrance of the building? You could install a snack vending machine.
4. Some minor upgrades can pay off big time
Some buildings require only minor upgrades to make them look more attractive. For some buildings, a simple paint job (interior and exterior) and replacement of the floors is all that is needed to consider the property “modern.” These, among other things, will allow you to offer a higher rent to new tenants and rent your units longer.
5. The rental property has individual electricity meters
Although units that include unlimited electricity are more attractive to many tenants, having individual electricity meters is necessary to avoid over consumption. This will save you money and avoid problems in the future.
6. The building has not been on the market for a long time
The best located buildings, which do not require major repairs and are fairly priced, will sell quickly. On the other hand, a building that needs many repairs and is priced too high will stay on the market for a long time. A good tip is to check the average time on the market for rental properties already sold in your desired neighborhood.
7. The number of vacant units does not exceed the number of occupied units
Too many vacant units can be a bad sign and makes you wonder: Does the building need major repairs? Is the area noisy? Are there disruptive tenants? Is the area lacking peace? You will lose time in finding new tenants and you may have bad surprises in the future.
8. Landlord’s history: is the building profitable?
To find out if the property is profitable, ask your real estate agent to include an inspection requirement that will allow you to review the property’s financial records including operating and rental records. Ask for at least two years of records.
9. The property has short-term profit potential
If you are looking to make a quick profit, you need to be thorough in your search criteria. A well located and at least partially renovated building may rent for more than the other way around. If you buy a building at too high a price, it may take many years before you make a profit.
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The location of the rental property as well as its condition are the main factors to consider before buying it. After all, the best tip we recommend is to use a property management software like Proprio Expert which allows you to manage all aspects of leasing from A to Z in one place.
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