If you're interested in adding a little extra value to your portfolio, buying a rental property may be the right choice to make. Owning a property to rent out has significant potential to be a good source of extra cash flow and can be a fun experience if you do your research and make the right decisions where the purchase of the property is concerned. 

Don’t let your inexperience with property investment discourage you from stepping into the real estate market. Consider these 7 key factors of a profitable rental and do thorough research. After doing the proper investigation and data analysis you will be ready to make a solid purchase that will be lucrative to your bottom line.

Choosing the right neighborhood to buy your investment property will have a big impact on it’s success as a rental property. An important factor to consider is what type of market you are shopping in. If you’re looking at a tourist town, find out if there is enough business in the area to support a long term tenant during the off-season. If your rental property is near a college campus, find out the statistics if enough students generally stay in town during the summer. With either of these scenarios, you want to make sure that your property isn’t sitting vacant for multiple months out of the year. 

Property taxes can quickly eat into your profits, if the area in which you buy has a high tax rate. Check with the local tax assessor for that county in order to find the tax records for previous years, to get an idea for what cost you will need to anticipate paying yearly. You can also talk to other neighbors in the community to see if they’ve heard of any future plans for rate increases. Be careful not to purchase a property in which the taxes will be higher than the rent amount you can charge your future tenants. 

If you are purchasing a large house or a home with multiple bedrooms, there’s a good chance that your potential tenants will be a family that has children. Look into the schools to see how they are rated. If you purchase property in a school district rated well and with good testing scores, there is more possibility that the tenants that rent your home will consider staying for a longer lease term, once the kids are settled and doing well in the local school system.

With so much information available online nowadays, people have easy access to statistics on local crime rates. This information could be a deal breaker for the prospective tenants if the information they find shows high numbers of arrest and records reported. These numbers will be especially important to those families with children, who want to make sure their kids are growing up and going to school in an environment and community in which they feel safe. 

 

Purchasing an investment property that meets all the criteria for the perfect rental property will only be a success if the local job market is strong. Making sure the area has a high employment rate will help ensure that your tenants can find and maintain employment, thus being able to afford to make their rent payment to you on time every month. Watch local job listings, talk to locals around town and check the labor statistics for the area.

The local amenities will have a big impact on whether or not people want to move into the area and rent your property. Do your research and see what restaurants, parks, movie theaters and shopping are in the neighborhood. Take into consideration if the property is within walking distance to these amenities or if there is public transportation available. All of these factors add up to a more desirable location. 

Check local rental listings for other properties in the same vicinity that are for rent. How many are there? If there is a shortage of availability, that means property is renting well and the market will support higher monthly rents costs. If there is an abundance of selections, then as a landlord, you may not be able to demand as high of a price.

When looking to get into the business of investment property, the most important step to take is putting in the time and effort into researching more than just the property itself. In a rental market, you need to ensure that these 7 key factors of a profitable rental have been taken into account and they will prove to be an asset in marketing and leasing your rental.