Successful Rental Property: Top 5 Indicators

March 7, 2018

Rental properties are great ways to generate passive income, but the selection of a property that isn’t going to be your primary residence posses a unique set of circumstances. With that in mind, we’ve compiled the following list of priorities that we’ve seen success in considering when purchasing a rental property:



Know Your Area


Consider the of neighborhoods when shopping. If you’re looking close to a university, for example, you can expect your tenant population to be a little more transient than usual. Also consider the job market and upcoming development of the surrounding area. These are both indicators of future demand, which serves a rental property well.



The Numbers


It goes without saying, but the numbers need to make sense! It is common practice to pull for properties when shopping around. This gives you a fiscal temperature of the area, and is a good indicator of the range of income you can expect for a specific property. Even beyond comps in a specific area, its even better to pull these for a few areas; this way you can compare between neighborhoods, and make a more educated decision when narrowing down your location.


Make sure these comparable are within the range of you’re . If you expect the mortgage alone to be $600 a month and most comps in the area are renting for about that much a month, it’s probably not a good deal for your passive income goal – cash flow is king.





If you’re considering properties with two or more bedrooms, the in the area is often an element overlooked by landlords, but not by tenants. Even if you are looking smaller properties, quality schools are an indicator of more sought after and family friendly neighborhoods. Public school systems post previous year school grades on their websites that you can use as an easy reference.



Expected and Unexpected Expenses


When calculating the numbers, also include expenses like simple curb elements, repairs between tenants, and expected property taxes. It seems without fail, however, that additional trouble pops up. Taking extra care, or even extra investing up front, in inspecting a property before deciding to purchase can save a lot of money down the road. Consider big-ticket items; how old is the roof? How old is the A/C unit? Are there any indicators of water damage?Even with due process before purchase, it’s a good idea to also build in a buffer in addition to your expected expenses.




Screening for a Good Tenant


Finally, you’ve found a great deal and it’s ready to ready to rent. The last critically important variable to your cash flow is the selection of your tenants. A rigorous screening process for new tenants can save you tons in the long run. There are countless horror stories about the conditions in which tenants have left properties. In addition to repair costs between tenants, the legal process for a possible eviction can also rack up costs.




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