(Newswire.net — May 25, 2022) — While rental property ownership stands to generate a healthy profit, such an outcome is by no means guaranteed. Needless to say, if you dive into the rental property game without doing your homework, your finances are likely to suffer. So, before investing in your first rental property, put in the time and effort to do the necessary prep work, regardless of how cumbersome you might find it. Putting the following pointers to good use can go a long way towards making your first foray into rental properties a slam dunk.
Research the Best Areas for Rental Property Investments
It should come as no surprise that location plays an important role in determining a rental property’s overall profitability – hence the reason so many realtors are fond of the mantra “Location, location, location!” So, before you start exploring prospective properties, do some research on the most opportune areas of your city or township in which to invest. If you’re feeling particularly ambitious, you may want to look into the best states for real estate investments.
When seeking out desirable areas, there are a number of factors you’ll need to consider. Said factors include (but are not limited to) rental prices, housing demand, rate of growth, local economy, and crime rates. Unsurprisingly, properties located in areas with robust demand and strong local economies are able to command higher prices than properties found in less desirable locales.
Make Sure All Prospective Properties Undergo Professional Inspections
To call a rental property a sizable investment would be an understatement. Even a relatively small property found in a low-demand area is liable to cost you a small fortune. That being the case, it’s only natural that you’d want to take every possible precaution before committing to such a large purchase.
Needless to say, discovering the presence of large problems after purchasing a rental property can pave the way for immense frustration and strained finances. So, before getting started on any paperwork, make sure that any property you’re interested in purchasing undergoes a thorough inspection from a certified home inspector. No matter how detailed a walkthrough you do on your own, certain issues can only be spotted by experienced pros. Furthermore, if a seller objects to an inspection, you may want to think twice about this purchase, as their reluctance may indicate a desire to conceal certain problems until after the deal has gone through.
Properly Screen All Rental Applicants
No matter how desirable the locale or how well-maintained a rental property is, it’s never going to turn a profit in the absence of responsible tenants. Unfortunately, many first-time landlords fail to properly screen rental applicants, which often results in unreliable individuals being given the go-ahead to move in. As any longtime landlord will tell you, some of their worst tenants did the best job of presenting themselves throughout the application process. While talking yourself up represents a skill unto itself, it doesn’t necessarily mean you’re going to be a responsible renter. Furthermore, depending on where you’re based, evicting tenants for nonpayment of rent may prove outright impossible.
You can get on top of this problem by properly screening every rental application you receive. After obtaining an applicant’s consent, you’ll need to run a credit check and criminal background check on them. If an applicant’s credit history is extremely troubled, you may want to think twice before approving their application. Additionally, while a criminal record shouldn’t necessarily preclude someone from renting from you, the nature of one’s crimes should be taken into careful consideration. For example, if an applicant has been convicted of crimes that could potentially pose a risk to you, other renters, or the property as a whole, this may be a red flag.
You should also obtain proof of income and confirm that an applicant makes enough to comfortably afford rent. Lastly, make a point of following up with any references an applicant lists, especially employers and former landlords.
Assuming that any rental property you invest in will generate a profit is pure folly. Although a fair number of rental properties are able to function as consistent sources of passive income, this doesn’t mean that every investment opportunity represents a risk worth taking. While there’s no such thing as a guaranteed moneymaker, there are a number of ways you can increase your odds of making a good investment. So, if you’ll soon be signing the paperwork for your first rental property, heed the advice outlined above.