Owning rental property is a tough business. Here are 10 things you should consider before investing in an income property.
First is the neighborhood. Its quality will influence the types of tenants you’ll attract, and how often you’ll face vacancies. A property near a university will mean student tenants, and regular vacancies.
Next are the property taxes. They vary, but high property taxes may mean it’s a nice neighborhood with long-term tenants.
The quality of local schools can affect an investment’s value. A bad one will bring your property down.
No one wants to live near a hot spot for crime. The police or library should have local statistics. The homeowner or realtor trying to sell you the house may not be so forthcoming about this.
Job opportunities tend to attract more people, which means more tenants. Go to the Bureau of Labor Statistics or local library for research. Workers will flock to locations that are expecting a big, new company.
Check for parks, malls, gyms, movie theaters, public transport hubs and similar amenities.
The municipal planning department will have information on plans for developments. Areas with new condos and business parks are probably growing. But be wary of developments that hurt property values, like new condos built over a popular park.
Unusually high listings and vacancies could be a seasonal trend, or signs of a neighborhood gone bad. Make sure to figure out which it is.
Rents are your bread and butter, so learn the area’s average. If it doesn’t cover your mortgage, taxes and other expenses, keep looking.
Finally, if the area is prone to flooding, earthquakes or other natural disasters, you’ll need extra insurance that will eat into your rental income.