If you have the savings for it and you’re able to manage your time well enough to fit it alongside your career, then you might be thinking of investing in a rental property. It’s often a good, reliable way to create a source of income that isn’t always as active as a second job, providing it’s managed right. But a successful investment means choosing the right property. How do you determine what that is, exactly?
It’s wise to buy a rental property that is within reliable driving distance. If you’re relying on a letting agent or property manager to take care of the day-to-day business, this might be less of a concern. However, if you’re looking at a self-manage situation, then you need to be able to visit the property should the tenants have any issues, or you need to make inspections. Otherwise, the distance can cause you to be negligent, which can leave the property at risk, especially if you end up with tenants who may behave badly if they believe their landlord isn’t likely to hold them accountable.
It should be close enough for you to visit when you need to, but beyond that, you should be looking at the potential profitability of the area, first and foremost. Zip code maps can help you see the average rental yield for the average property, for one, but you also need to consider what it’s close to. The closer it is to certain institutions or businesses, such as retail areas, colleges, or commuting areas, the more value it might have.
Making the best use of a location is about realizing who it would appeal to. For instance, if it’s close to a college, then it should be very easy to find students to it consistently. If it’s closer to a retail or industrial area of the town or city, then you should look at young professionals more closely. Determining who is most likely to rent a property can help you improve your marketing. Naturally, appeal goes beyond demographics, as well, if you have naturally attractive features like a good garden, a balcony, a patio, or otherwise, it can help you attract a higher-paying tenant.
How much the tenant is willing to pay you only matters if it helps you make a profit on what you paid for the home. For instance, new build homes might be attractive, but they are also on average much more expensive. You need to take the time to work out of the return on investment of the property as best you can. This includes not only the buying price but any work you might need to do to repair or improve it, too.
It’s wise to get to know your area, the kind of people who live there or would want to live there, and how much you can expect to invest before you start trying to make money from it. Keeping a rental property isn’t easy, but it’s even harder if you choose the wrong property.