A rental property is one of the smartest investments one can make. If you do your due diligence, it can be an exciting and rewarding experience.
That said, just like any other investment type, a real estate investment can prove to be a daunting experience, especially for newbies. Before investing, you need to ensure you have done as much research as possible.
From choosing the right location, to charging the right rent, to investing in the right amenities, and everything in between.
In this article, State Property Management will provide you 8 tips on how to choose a profitable rental property.
Tips to Choose a Profitable Rental Property
Choose the right Neighborhood
As an investor, where you choose to invest in a rental property will usually have a direct correlation with certain aspects of your investment. Including, the quality of tenants you attract, the vacancy rate, and how much rent you can ask.
Familiarize yourself with Property Taxes
Property taxes are going to make up a significant portion of your expenses. As such, it’s important to know what to expect before inking the deal.
What you want to go for is a desirable location even if it has high property taxes. In such neighborhoods, high property taxes would still allow you to attract quality long-term tenants.
However, please keep in mind that there are also undesirable locations with high property taxes. These are the locations to avoid, as the tax bill would significantly eat into your profits.
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To know how much tax you’re going to pay, please pay a visit to the municipality’s assessment office. Alternatively, you could also ask for the same from the communities’ homeowners. Also, find out whether there are any future plans to hike the taxes.
Go for a Safe Neighborhood
Again, choosing the right location is key when it comes to real estate investing. And since you’ll be going for quality tenants, make sure to go for safe neighborhoods. No quality tenant will want to live in a neighborhood with a reputation for criminal activity.
Luckily, checking for crime statistics of a particular location is relatively easy. You could check the rates from the local police, public library, or online state and municipal sites.
You should also check to see the trends in crime rates for the last couple of years. That is, whether they are rising or reducing.
Check the Local Job Market Trends
The rise or decline of the job market in a particular area will have a direct impact on your success. You should aim for areas that have growing employment opportunities. This will guarantee you a steady stream of tenants, lowering your vacancy rates and improving your ROI.
To get insights about the local job market trends, visit the local library or check with the U.S. Bureau of Labor Statistics.
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Also, be vigilant about any companies moving in or out of the area. If you see companies making announcements about moving out of the area, that could be a potential red flag.
Continue with your due diligence before investing. On the contrary, if companies are moving into the area, that could signal a potential high ROI.
Go for Areas with the right Amenities
Certain amenities are bound to attract a certain class of tenants. To attract the crème de le crème of tenants, invest in an area that has quality amenities. Attractive amenities include things like gyms, restaurants, parks, public transportation links, and movie theatres.
If you are not well conversant with a particular area, go to the City Hall for some promotional literature. This should give you an idea as to where you can find the best blend of private property and public amenities.
Find Out About Average Rent
Rent is the bread and butter of any rental investment. As such, it’ll be important for you to know what the average rent in a particular area is. The right rent amount is one that can provide you with a consistent positive cash flow.
Positive cash flow simply means that the rent you’re getting is more than the expenses you’re paying for. Common expenses include things like property taxes, mortgage payments, and cost of repairs and maintenance.
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To know what the prevailing rent is for your property type, interview local landlords. There are also numerous online tools you can use to check the prevailing rent amounts. Make use of the filters to narrow down to the specific location of interest and property type.
Hire a Property Manager
Working with a professional like State Property Management who understands the local real estate market like the back of their hands is an invaluable resource to have.
They will help you make the right investment for optimum return on investment. What’s more, they will help you with its management to save on time and stress.
Conclusion
Certain things have to line up well for you to run a profitable rental property. And it takes a lot of footwork and research to do everything, from the neighborhood, to amenities, to the job market, to schools, and everything in between.
Fortunately for you, if you are looking to invest in the Orlando rental market, State Property Management can help. We are one of the leading property management companies in the Central Florida market. Get in touch to learn more!