When investing in rental property, it is important to know the features that define a profitable investment. Let’s say you buy a home, condo or apartment for $500,000. You spend $10,000 on repairs or renovations. The property rents out for $1500 monthly. Remember, the cost of monthly maintenance or repairs when a lease ends etc would all go into your investment. Now, after a few months, you realize it is very difficult to find a tenant for your property. Your rental property is often vacant for months thus giving you no return on your investment. This could be due to several reasons.
So what are the features of a profitable rental property?
Location, Location, Location
A real estate agent’s favorite word, no doubt, but that doesn’t mean it is not an important consideration. Before you buy a property for the purpose of renting it out, do the following:
- visit the location
- look around the neighborhood and try to judge the environment. (Does it look safe? Quiet or noisy? etc)
- try and talk to other residents
- ask about security
- if possible, talk to homeowners and ask them about the turnover rate of tenants in the area
- find out if there are schools or colleges nearby
You could look up listings for the neighborhood and find out what the average rent for the area is. If you are going to invest in a profitable rental property, rent is going to be one of the most important features that will determine its profitability.
Doing your research before spending your hard-earned cash is a huge factor in determining if the rental property will give you a solid ROI. Find out the crime rate in the area of the property. If the property is located in an area with a high crime rate, you will be less likely to get tenants easily or even if you do, it would be hard to get good tenants.
You can also ask residents of the area about the crime rate and the general environment of the location. Meeting residents will also help to give you a good idea of the kind of community the property is in.
Expenses like property taxes are an important feature when considering the ROI of a rental property. If you’re going to be paying a hefty amount in taxes on the property, you won’t really be profiting much. Make sure you do a detailed research into this before you buy.
Amenities of the Rental Property
Amenities are an important feature of a profitable rental property. If the property does not have the basic amenities like heating, cooling and water or if the systems are unreliable or in disrepair, you will have to spend quite a lot of money on getting these fixed. Heating and cooling systems cost a lot and you cannot ignore them since it is necessary for a landlord in Massachusetts to provide reliable heating and cooling to tenants.
These features will determine if the rental property is profitable or not and you can make an informed decision before investing your money.