Rental properties come in a variety of shapes and sizes, and the options for your next investment is truly endless. If you’re first starting out in the real estate business, and more specifically in with rental income, it can be a daunting task to start. What should you consider first? At Own It Detroit we’ve broken down the steps to make things a little easier to organize, and get you back on the market!
Things To Consider
When you’re looking into a rental property, there are a few characteristics that you should consider before purchasing. These are not necessarily listed in any particular order, as each area may hold different weight based on the investor.
- Age – Usually, the older the property, the more work that needs to be done. The newer the property, the less maintenance expenses you’ll be taking on. While this is not always true, it is important to consider when a house was built, based on the construction factor during that time period.
- Size – Always consider square footage, number of bedrooms, and quantity of bathrooms in any rental property. The other oddities of a home can be redesigned, but if the size isn’t there, it won’t move quickly.
- Condition – We think this is one of the most important factors for any rental property you choose to invest in. If it needs a lot of work, the condition may not be worth the investment. Additionally, if something is going to require a lot of effort and time for you to put towards, you’ll need to weigh this characteristic as well.
- Location – Ideally, you want your rental property to be in a safe and desirable neighborhood. Your location should be able to appreciate in value and hold long tenants. In fact, location is an important characteristic that could potentially affect the other items on this list, such as price and income.
- Price – You need to know what you can afford and what your return on investment will be. Make sure that these two areas balance out and are manageable for you with any potential rental property.
- Expenses – The price of your property may not matter if the expenses are too high to handle. Make sure that your price vs. rent ratio is balanced so that you are definitely making a profit. Try not to just estimate expenses! Call around and do some research to get real numbers to make an educated decision on purchasing the rental property.
- Income – Your rental income needs to be high enough to cover the expenses, but should also leave you with a profit. Make sure that the rental income you’re predicting is realistic to hold a tenant, along with exactly how much money you’ll be bringing in.
While there are many other steps that go into actually purchasing a rental property, we hope this list get’s you on track towards your first great investment!