Sunday, 29 August 2010
Buying Rental Properties - Some Tips
Buying rental properties can be a great way to build your wealth. However, as in most real estate investment, it is sometimes difficult to know if you've found a good deal - especially the first time. Here are some things to look for to be sure that rental is a great investment.
<P>1. Location. If traffic is heavier, rentals are easier to rent. A sign will often pull more response than an ad in the paper. If it is a nice locale, it will usually rent faster. This is also true of places close to amenities.
<P>2. Numbers. Run the numbers. Get every last expense figured into your calculations, and be sure that you will have positive cash flow from the start.
<P>3. High home prices. Look in towns with high home prices, as this creates rental demand. What do people do when they can't afford to buy? They rent.
<P>4. Low maintenance buildings. Avoid cedar-shake roofs, and wood-sided buildings. Look beyond current expenses to how much maintenance the building will need. Low maintenance means less headaches and more profits.
<P>5. Good rental history. Ask to see the rental history. Note how long residents are staying on average, and how well they pay on time.
<P>6. Below market rents. Buying rental properties with below-market rents means you get to raise rents. Raising rents means you imediately raise the value, because rental property values are based on income.
<P>7. Complies with zoning and fire codes. Have it inspected, and ask local officials if there are any problems.
<P>8. Less than 20 years old. This is somewhat arbitrary, but if you limit your search to newer buildings, you will be less likely to have building code and maintenance problems.
<P>9.Owner/manager that is out of state. These properties are often the best deals, because it is tough to manage a property from far away. An out of state seller is often more concerned with a quick sale than a high price.
<P>10. Neighborhood is stable or improving. Stable is okay, but if you can buy in a neighborhood that is improving, you'll rent the units more easily, and therefore get automatic appreciation in value with time.