Real Estate Investment

Buying Rental Property Overview: A Quick Guide to Important Factors to Consider When Investing in Residential Real Estate

While it’s not hard to get a hold of some rental property, actually profiting from it can be tricky. Real estate can be a pretty tough business, and the field comes with many potential risks that could lead to you losing much money. What is the right way to go about buying rental property? How can you select a property that has the potential to be profitable?

For starters, it’s a good idea to visit the property in person if you can. If you’re investing in land in another country, it probably won’t be easy to visit. Whether you can physically visit the property or not, you’ll still need to do thorough research on the area itself. What is the neighborhood like? A neighborhood with a high crime rate or high vacancy rate is a red flag. Also, what is the topography like? Is the area susceptible to flooding or landslides? What kind of industries and businesses are in the area?

While having an agent help you is great, it’s essential that you do some of your research first, as an agent might try to pressure you to purchase you would ordinarily not feel comfortable or confident in making. Or you could work with a partner instead of going through a third party that charges unnecessary fees.

Buying Rental Property With Property Tax Considerations

Another critical thing to consider when buying rental property is the property taxes. These vary widely across any geographical area. Higher taxes are not necessarily a bad thing, as long as the property is in an impressive neighborhood that can attract long-term tenants. On the other hand, high property taxes or plans to increase property taxes in the future could also mean that the town is in financial peril.

If you want your property to appeal to families, then there should be quality schools nearby, as well as a low crime rate—the lower the crime rate, the better. No parents are going to want to rent a home in a bad neighborhood. They’ll like to send their kids to a decent school as well.

A few other vital things for attracting tenants include the local job market, amenities such as restaurants, stores, entertainment, and possibly public transportation links.

Calculate the average rental cost for properties in the area similar to the one you are thinking of buying. Also, check out the number of current listings. If there are many listings, it could be a sign that there is a seasonal cycle in the area or that the neighborhood itself is bad and not worth putting money into.

When buying rental property, it’s worth working with a partner that will help you with the research and management of the property. DiversyFund is an excellent place to start, as they do not charge any unnecessary or excessive fees.

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