Purchasing property is one of the best ways to build your business and improve cash flow. With a rental property, you can have regular income that requires minimal work but offers fantastic dividends. Not only this, but real estate appreciates quickly and can enable you to turn a profit later on. Today, we’ll investigate the things you must do before you sign the paperwork and start renting.
Get Your Finances in Order
Financial planning is crucial for everyone, but it’s even more so for those who want to profit from property. Not only do you need to save for a down payment, but you also need to consider property taxes, advertising costs, maintenance expenses, and an emergency fund.
Consulting with a financial planner before you start searching for homes can be an excellent way to ensure that you have covered all your bases and are set up for a profitable investment. They can also advise you on what home expenses will be tax deductible and how much you may need to save in reserve for any potential problems or repairs the home may have.
Closely Research the Neighborhood
Not every neighborhood is a good option for rental property. When deciding which neighborhood to buy in, you’ll want to consider some of these factors:
- School district quality
- Crime rates
- Public transit options
- Walkability
- Distance to stores and parks
- Utility expenses
- Property taxes
- Deed restrictions and HOAs
- Rent controls and landlord restrictions
Look into the demographics of the neighborhood, too. If most residents own their homes, it might be difficult to attract renters, as people will automatically associate that area with home ownership. Similarly, an area that is mostly middle-aged professionals will also not have many renters.
The ideal neighborhood will have a young population, as these people will likely not have saved enough to buy their own property. Neighborhoods near a university will be popular with college students, while a town with a great school district will attract parents who want their children to get a good education. If you find a property that is close to major employers, you’ll also find it easier to find renters.
Perform Market Rent Research
While you may believe that an area with high sales prices also means that the average rent is high, you’d be surprised to find that this is not always true. Some towns have strict rent controls that artificially depress rents and make it hard to turn a profit, even for a larger home.
When deciding where to buy, hop onto a rental site and search for properties similar to the kind that you would like to buy. Once you’ve found a property, an appraiser can give you a more accurate estimate of potential rents.
Identify Your Potential Renters and Develop a Marketing Plan
Understanding your target audience is crucial to success. While it’s always possible that you’ll find a renter who meets your needs but is not your expected demographic, having a good idea of the types of renters you want to attract will also help you create a marketing plan to appeal to them.
For example, maybe most renters in your area are young parents who want a safe and secure place to raise their children. You can then adjust your listings to emphasize what they would be interested in, such as good school districts, a fenced-in yard, and a low crime rate.
On the other hand, suppose you want to attract young professionals right out of college. Your advertisements can then prioritize things like walkability, proximity to nightlife, and low pet fees. In some cases, you might want to emphasize that you’re willing to do short-term rental agreements, such as month-by-month, to better accommodate their needs.
Work With a Mortgage Broker in Your Area
Once you’ve completed all your research, it’s time to get qualified for a mortgage. Brokers are a great way to get the best rates on your loans. They often have in-depth knowledge of a specific market and can help connect you to programs that will reduce your upfront expenses. Additionally, they’ll be able to tell you which type of mortgage will provide you with the best return on investment based on your property goals.
You should look for a broker that specifically works in your area rather than looking for a general online broker. For example, those in Tuscon, Arizona, may consider Arnaiz Mortgage, a company that is highly familiar with this specific market and its fluctuations.
While financial considerations are essential when deciding to purchase a property investment, you also need to consider human factors like the safety of the neighborhood and the potential renters you can attract. Working with a great mortgage broker can ease this process, as they will be able to point you in the right direction and find high-quality mortgage products that match your budget. Do your research carefully and get to know the neighborhood to set yourself up for great success.
