How to Choose a Rental Property

Check Out Potential Rentals Carefully

Investing in a rental property is a good way to generate income, but there are important matters to consider before you buy. A great deal that looks like the investment of a lifetime may be too good to be true, and the suggestions of friends and family might or might not be on target. The best way to make the right choice when purchasing real estate is to do your homework. That means looking at any potential purchase from a number of different angles.

Instructions

1. Evaluate the location. Call the police department that has jurisdiction over that area and ask for crime statistics. Walk the neighborhood and surrounding area. Is the landscaping typically kept in good order? Are the automobiles well cared for? You can determine a great deal about the flavor of an area by walking around. It's a sure bet that any potential renters will be doing the same thing. If possible, avoid high turnover neighborhoods with lots of renters in place, like college rental areas that can have higher vandalism and nuisance problems.

2. Run the investment and maintenance numbers. Any investment has to be priced right for you to make a profit after the mortgage and all the expenses are paid. Running some scenarios now will save you some nasty surprises later. If the property is vacant for a period of time, will you have a cushion? Do you have a good idea of the cost of maintenance, with a plan for upkeep, like painting, roof repair, driveway maintenance and the like? Are you clear about the tax advantages and disadvantages given your specific circumstances?

3. Check the market relative to rental charges. The local paper for the area will have valuable information about rentals. What will you have to rent the property for to make a profit? Will the area support that?

4. Introduce yourself to the neighbors. A 5-minute talk with the neighbors will give you information that you won't be able to get any other way. A few candid remarks about the property can be very enlightening.

5. Buy properties with a lease in place if possible. This will guarantee initial income. To be on the safe side, introduce yourself to the tenants before you buy to get a feel for both them and the way they maintain the property.

6. Schedule an inspection. Know what you are buying. Participate in the inspection process, and on inspection day go prepared with a list of questions. This is particularly important with an older home, or one that may have had problems in the past with fallen trees or major electrical or plumbing issues.