5 Steps to Find the Right Investment Rental Property
It is really a challenge to find the right investment rental property, even when you find a possible investment property, you must evaluate it carefully and not just jump on the first opportunity, or you may risk possible losses, or low income. Here are 5 steps for finding investment property.
1. Choose whether you want to search on your own for rental properties, or whether you want to use a broker. Brokers are very likely to know about investment rental property which is going on the market long before a sign goes up, or an advertisement hits the paper. A good broker will also be able to advise you about the market values in the neighborhood, and comparable properties in the area.
2. Before you even locate your first investment rental property, you should make sure all of your finances and credit are in order. Mortgage companies, banks, and lenders will be thorough in checking your credit before agreeing to the investment in the property. Checking your own credit scores and reports will allow you to fix any problems ahead of time, rather than experiencing a nasty surprise.
3. Do you want an apartment complex which requires renovations, or one which is up to date and ready for action? While an older apartment complex may appear to save you money, you need to consider the potential costs. What repairs will be needed? How much will renovation cost? Will the renovations allow you to raise rent prices to cover the added cost? Often you will find an older apartment complex in need of repairs can become very expensive, once you factor in all the costs to bring it up to date. Make sure to have an inspection of the property done, by a professional. You want to know about every possible code violation, needed repair, and surprise problems you were not aware of. Only with a thorough inspection can you get a true cost of ownership of for the property.
4. Just because a property is not listed, does not mean it is not for sale. Call the rental number for the apartment complex, and get the owner’s phone number. Call and ask if he is planning to sell the unit. Especially if he is from out of the area, he may be tired of dealing with issues remotely, and is ready to make a deal.
5. Whether you are using a broker or not, you need to research the local market. How are house prices in comparison to rent? How much do other apartment units rent for in the area? If house prices are low, you may find your renters are quickly departing to buy homes. If house prices are high, the demand for rentals will stay high. You need to make sure the rent you are planning to charge is comparable to similar properties, and will allow you sufficient profit. Make sure to figure a vacancy rate of 10% or higher into your calculations.
Just because you are anxious to make an investment, do not run blindly forward. Take the time to evaluate carefully, and buy the perfect property. It may take a little more time and effort, but in the end, your income and happiness will be rewarded greatly.
June 16th, 2010 at 9:58 pm
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