Before beginning real estate investing, it’s important to consider these four tips for successfully investing and renting rental properties. Here’s what to know.
Many new investors get carried away with the excitement of real estate investing and the possibility of making passive income. Just the idea of it all can have these newbies making big plans for the future.
Important Tips for Real Estate Investing
Ready for some truth?
There is no guarantee in real estate. You may invest in a multi-family rental property and find that you can retire 10 years sooner than you ever thought possible. Or, you may invest everything you have into one bad investment and find it nearly impossible to recover.
There are books out there claiming to tell you everything you need to know about real estate investing. And while there are many pros who have gone before you and have offered up their advice, there is no one guidebook that can tell you everything based on your set of circumstances. Sure, it can absolutely point you in the right direction of building and diversifying your portfolio, but it doesn’t give you step-by-step directions that fit every scenario.
Just as your teachers will teach you concepts and you have to learn the application in life. The best thing you can do is to learn the tips and tricks of the trade — and then learn how to apply them to your personal situation.
1. Look for Profitable Rental Properties
Just because a property is on the market for a great price does not mean that it is suitable for real estate investing. Some properties may be listed at such a low cost because they don’t have many profitable qualities. It helps to know what to look for when it comes to purchasing properties that can increase your profits.
Here are a few qualities to keep your eye on:
— The Neighborhood
Look around the neighborhood. Are there a lot of rentals available or a lot of homes for sale? Is there a certain type of most common home in the area? Is there a large homeless population? Is the walkability factor high? Quality tenants are going to look for a rental in a neighborhood that feels like home. Pay attention to the feeling you get while in the area.
— The Schools
Good schools are on the top of nearly every parent’s must-have list. Take a look at the ratings of the schools in the area to determine whether or not they are going to be satisfactory to potential new tenants.
— The Job Market
Having a job market that is thriving without the long commutes is going to be a bonus for every potential rental property investor. It ensures that tenants will have access to employment and will be able to pay their rent. This is the most important factor when considering a purchase of a rental property. You must have the jobs available for people to earn enough income to pay rent!
— The Crime Rate
Unless someone is involved in criminal activity, it is highly unlikely that they’d jump at the opportunity to place themselves in the middle of it in a rental. This may lead to high vacancy rates. In addition, high crime means a high chance of damage or vandalism at your rental property that could end up costing you money. We strongly suggest looking up the crime rate, and sex offender list for the area.
— The Property Taxes
Some areas will have higher property taxes than others. While it should definitely not be an end-all factor in purchasing a rental property, it is something to consider. If your higher taxes are due to an ideal location, those extra dollars are probably worth it. If not, you may want to look a little more closely at your options.
— The Amenities
When looking into real estate investing, consider the surrounding amenities. What are the things in the neighborhood and close surrounding area that will make someone want to live there? Are there local parks? Dog parks? Nearby dining? Grocery stores? Medical facilities? Movie theaters and other methods of entertainment? The more amenities you encounter, the better.
— The Outlook for the Future
Does the area look like one that will see future development? Does it seem like you are coming in at a good time when the market rates may increase and development picks up? Or does the area seem doomed? Are businesses closing? Are there a lot of vacant properties?
— Average Rental Rates and Current Rental Market
One of the most important aspects of real estate investing is understanding the rental market. Gain an understanding of the rental market in the area of the property. Compare it to others to determine the rent level. Is there a demand for rental properties? What does the average vacancy rate look like?
2. Consider Single-Family Rental Properties
Single-family properties are one type of rental property that most investors start with. They are always greatly sought options for renters – especially when they come with some of the qualities listed above. For new investors, it allows you to handle one tenant at a time while getting your feet wet.
3. Consider Multi-Family Rental Properties
Investing in multi-family rental properties means being able to grow your portfolio in less time. You don’t have to purchase multiple properties, but rather just one — and then you can have income from multiple tenants. One loan, multiple units. This avoids many frustrations and a boatload of paperwork. Though, it is important to note that for someone who is just starting out, taking on a multifamily property could be overwhelming unless you have help from a multifamily property management company.
4. Always Hire a Property Manager
Property managers are great at handling rental properties, whether you have one or a hundred and one in your portfolio. They are able to handle everything from the advertising of the property and tenant screening to rent collection, maintenance and repair, as well as eviction if necessary. This not only reduces the headaches for you but also frees up your time so that you can continue to focus on real estate investing without having to worry about actively managing your rental properties.
When you look for a property manager, be sure that you find someone like Real Property Management Evolve that:
- Is experienced in both single-family rentals and multi-property rentals (even if you don’t have both now)
- Has a network of vendors and professionals in the community that can handle any needs of your property.
- Has a thorough tenant screening process to find only the highest-quality tenants.
- Knows and practices all the fair housing laws locally and federally.
Regardless of how new you are to real estate investing, following these tips for successfully finding the right rental properties can get you started in the right direction.