What Makes a Good Rental Property?

When you are on your searching for good rental properties to invest your money and often your time in, there are several important things you should keep in mind before signing on that dotted line. Here are some guidelines:

There's an excellent reason for this old real estate saying: “The three most important things to look for in real estate are location, location, location.” It’s as true as it ever was.  Look for rental investments in areas where people want to live because they are convenient to schools, shopping centers, transportation, major employers and public facilities.

Consider the price of the property very carefully then be realistic about the amount of rent you can justifiably charge tenants. If you hope to charge more than what you will have to pay in monthly mortgage, insurance and taxes, you should be careful to invest no more per month than the local rental market can bear. If your goal for rental income is to “break even” or less as you wait for the property to increase in resale value, then the price becomes somewhat less important.

Think about future resale value. Properties in growth areas can rapidly increase in value and can turn your rental property into a prime resale opportunity. In contrast, if you invest in a low-growth area you may have a steady stream of renters but you won’t enjoy a major growth in equity.

Look around the neighboring homes and take note of how well they are maintained. Are the lawns mowed? Does the paint still look good? This is very important because even one bad apple on the block can drive down potential rental income.

Look for low-maintenance properties that will stand up to the wear and tear of renting. You will want something with solid construction because even the most agreeable tenant is less careful with a home they are renting than someone who owns it.

Something else to consider is how much of your time will you be able to devote to the oversight and upkeep of your investment property. If you live nearby and can monitor things yourself that keeps it pretty simple. But be honest with yourself and if it turns out you don’t have time to spare, or don’t live close enough, it might be a good idea to work with a property management firm.