Lauer Realty Group

Menu
  • Featured homes
    • Close
    • Active & Pending
    • Open Houses
    • Sold
    • Close
  • About
  • Testimonials
  • Resources
    • Close
    • Area Resources
    • Buyer Resources
    • Seller Resources: How to List Your Property
    • Eco Friendly Resources
    • Close
  • Home Styling
  • Blog
  • Contact
Menu
  • Featured homes
    • Close
    • Active & Pending
    • Open Houses
    • Sold
    • Close
  • About
  • Testimonials
  • Resources
    • Close
    • Area Resources
    • Buyer Resources
    • Seller Resources: How to List Your Property
    • Eco Friendly Resources
    • Close
  • Home Styling
  • Blog
  • Contact

Buy
Search
sell

Top 10 Features Of A Profitable Rental Property.

March 7, 2013 by Lauer Realty Group

Arm chair and piano in living room

living-room

 

Take a look at the top 10 things you should consider when searching for the right rental property.

  1. Neighborhoods
    The quality of the neighborhood in which you buy will influence both the types of tenants you attract and how often you face vacancies. For example, if you buy in a neighborhood near a university, the chances are that your pool of potential tenants will be mainly made up of students and that you will face vacancies on a fairly regular basis (during summer, when students tend to return back home).
  2. Property Taxes
    Property taxes are not standard across the board and, as an investor planning to make money from rent, you want to be aware of how much you will be losing to taxes. High property taxes may not always be a bad thing if the neighborhood is an excellent place for long-term tenants, but the two do not necessarily go hand in hand. The town’s assessment office will have all the tax information on file or you can talk to homeowners within the community.
  3. Schools
    Your tenants may have or be planning to have children, so they will need a place near a decent school. When you have found a good property near a school, you will want to check the quality of the school as this can affect the value of your investment. If the school has a poor reputation, prices will reflect your property’s value poorly. Although you will be mostly concerned about the monthly cash flow, the overall value of your rental property comes in to play when you eventually sell it and retire someday. (To keep reading about owning and selling real estate, see Sell Your Rental Property For A Profit.)
  4. Crime
    No one wants to live next door to a hot spot for criminal activity. Go to the police or the public library for accurate crime statistics for various neighborhoods, rather than asking the homeowner who is hoping to sell the house to you. Items to look for are vandalism rates, serious crimes, petty crimes and recent activity (growth or slow down). You might also want to ask about the frequency of police presence in your neighborhood.
  5. Jobs
    Locations with growing employment opportunities tend to attract more people – meaning more tenants. To find out how a particular area rates, go directly to the U.S. Bureau of Labor Statistics or to your local library. If you notice an announcement for a new major company moving to the area, you can rest assured that workers will flock to the area. However, this may cause house prices to react (either negatively or positively) depending on the corporation moving in. The fall back point here is that if you would like the new corporation in your backyard, your renters probably will too.
  6. Amenities
    Check the potential neighborhood for current or projected parks, malls, gyms, movie theaters, public transport hubs and all the other perks that attract renters. Cities, and sometimes even particular areas of a city, have loads of promotional literature that will give you an idea of where the best blend of public amenities and private property can be found.
  7. Building Permits and Future Development
    The municipal planning department will have information on all the new development that is coming or has been zoned into the area. If there are many new condos, business parks or malls going up in your area, it is probably a good growth area. However, watch out for new developments that could hurt the price surrounding properties by, for example, causing the loss of an activity-friendly green space. The additional condos and/or new housing could also provide competition for your renters, so be aware of that possibility.
  8. Amount of Listings and Vacancies
    If there is an unusually high amount of listings for one particular neighborhood, this can either signal a seasonal cycle or a neighborhood that has “gone bad.” Make sure you figure out which it is before you buy in. You should also determine whether you can cover for any seasonal fluctuations in vacancies.Similar to listings, the vacancy rates will give you an idea of how successful you will be at attracting tenants. High vacancy rates force landlords to lower rents in order to snap up tenants – low vacancy rates allow landlords to raise rental rates.
  9. Rents
    Rent will be the bread and butter for your rental property, so you need to know what the average rent in the area is. If charging the average rent is not going to be enough to cover your mortgage payment, taxes and other expenses, then you have to keep looking. Be sure to research the area well enough to gauge where the area will be headed in the next five years. If you can afford the area now, but major improvements are in store and property taxes are expected to increase, then what could be affordable now may mean bankruptcy later.
  10. Natural Disasters
    Insurance is another expense that you will have to subtract from your returns, so it is good to know just how much you will need to carry. If an area is prone to earthquakes or flooding, the extra insurance can add up and eat away at your rental income. (To learn which policies you will need, check out Insurance Tips For Homeowners and Beginners’ Guide To Homeowners Insurance.)


Getting Information
Talk to renters as well as homeowners in the neighborhood. Renters will be far more honest about the negative aspects of the area because they have no investment in it. If you are set on a particular neighborhood, try to visit it at different times on different days of the week to see your future neighbors in action.

The Physical Property
In general, the best investment property for beginners is a residential, single-family dwelling or a condominium. Condos are low maintenance because the condo association is there to help with many of the external repairs, leaving you to worry about the interior. Because condos are not truly independent living units, however, they tend to garner lower rents and appreciate more slowly than single-family homes. (For more insight, read Buying A Condo and Does Condo Life Suit You?)

Single-family homes tend to attract longer-term renters in the form of families and couples. The reason families, or two adults in a relationship, are generally better tenants than one person is because they are more likely to be financially stable and pay the rent regularly. This owes to the simple fact that two can live almost as cheaply as one (as far as food, rent and utilities go) while still enjoying dual income. As a landlord, you want to find a property and a neighborhood that is going to attract that type of demographic.

When you have the neighborhood narrowed down, look for a property that has appreciation potential and a good projected cash flow. Check out properties that are more expensive than you can afford as well as those within your reach – real estate can often sell below its listing price. Watch the listing prices of other properties and ask buyers about the final selling price to get an idea of what the market value really is in the neighborhood. For appreciation potential, you are looking for a property that, with a few cosmetic changes and some renovations, will attract tenants who are willing to pay out higher rents. This will also serve you well by raising the value of the house if you choose to sell it after a few years.

As far as cash flow, you are going to have to make an informed guess. Take the average rent for the neighborhood and subtract your expected monthly mortgage payment, property taxes (divided by 12 months), insurance costs (also divided by 12) and a generous allowance for maintenance and repairs. Don’t lie to yourself and underestimate the cost of maintenance and repairs or you will pay for it once the deal is done. If all these figures come out even or, better yet, with a little left over, you can now get your real estate agent to submit an offer and, if everything goes well, order business cards with Landlord emblazoned across the top.

The Bottom Line
Every state has good cities, every city has good neighborhoods and every neighborhood has good properties, but it takes a lot of footwork and research to line up all three. When you do find your ideal rental property, keep your expectations realistic and make sure that your own finances are in a healthy enough state that you can wait for the property to start producing cash flow rather than needing it desperately. Real estate investing doesn’t start with buying a rental property – it begins with creating the financial situation where you can buy a rental property.

Read more: https://www.investopedia.com/articles/mortgages-real-estate/08/buy-rental-property.asp#ixzz2MrxZCfFd

Filed Under: Helpful Hints, Home Buying Tagged With: Buying, Forward Realty Group, homes for sale madison wi, making money thru investing, Real Estate, Rental

Contact Us

  • This field is for validation purposes and should be left unchanged.

Search Our Properties

In Madison

East Side

Atwood Homes Downtown Condos Eken Park Elvehjem Emerson Lake Edge Lake Mendota Lake Monona Maple Bluff Northside Olbrich Tenney Park Willy St
 

West Side

Blackhawk Dudgeon-Monroe High Point Hill Farms Midvale Heights Nakoma Midvale Heights Parkwood Shorewood Hills Sunset Village University Heights Vilas Walnut Grove Westmorland Wexford

Around Madison

Belleville Columbus Cottage Grove Deerfield DeForest Fitchburg McFarland Middleton Monona Mount Horeb Oregon Sun Prairie Stoughton Waunakee Westport Verona

Zip

53703 53704 53705 53711 53714 53715 53716 53717 53718 53719 53562 53726

Price

Under $100,000 $100,000-$200,000 $200,000-$300,000 $300,000-$400,000 $400,000-$500,000 $500,000-$750,000 $750,000-$1,000,000 $1,000,000 and up

Condo Buildings

100 Wisconsin 350 West 4th Ward Lofts Bedford Court Blair House Capitol Point Capitol West Das Kronenberg Dayton Row Doty School Farwell Fauerbach Germania Hancock Court Kennedy Point Loraine Marina Metropolitan Place Nolen Shores Pinckney Place The Livingston Union Transfer
Open Houses
Featured Homes
Madison Foreclosures and Short Sales
contact us
FacebookInstagram

About Us

Lauer Realty Group is an independent brokerage firm with over 20 years of real estate experience, a strong hold in the top 1% of Realtors® in Dane County and a down to earth approach to make the process transparent. We work hard to make sure you get into a smoother process that ends with a smart transaction. Our mission is to maintain a supreme level of service while providing masterful marketing, and helping our Madison neighborhoods flourish.

Contact Us

Lauer Realty Group (East)
2229 Atwood Ave
Madison, WI 53704

Lauer Realty Group (West)
2526 Monroe St
Madison, WI 53711

Office: 608-467-3220
Email Us

Se habla Español
Contacto

  • Featured Homes
  • About
  • Testimonials
  • Resources
  • Blog
  • Contact
  • Privacy Policy
Lauer Realty Group logo

Copyright © 2023 · Winning Agent Pro Theme, Customized by Lisa Sperling on Genesis Framework · WordPress · Log in