5 Things to Remember When Investing in a Rental Property

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The following is a guest post. Enjoy!

5 Things to Remember When Investing in a Rental Property
Buying a home is nerve-wracking enough; purchasing a rental property puts an even greater burden on your shoulders since your goal is not just to have a place simply to live, but to actually profit from the investment.
There are so many details to consider. Some of the questions that often come up are listed below:
  • How much money will it take to get the home in move-in condition for tenants?
  • Should you be looking into tax benefits?
  • Does the property have the potential to provide you with a steady income?

Although the process of becoming a landlord (or lady) is somewhat tedious and fraught with unnerving legal jargon, buying a rental property is essentially the same as purchasing any other house. The best thing to do is picture yourself living there. Would you pay as much as you’re hoping to ask? Listed below are several considerations to be sure to remember if you’re looking at purchasing a property to rent out as an investment.

1. Location, location, location –

Okay, so maybe it’s a cliché, but location really does matter when you are considering taking on a buy to let mortgage, and rental properties are certainly not exempt. While buying a cheaper property in a run-down neighborhood may seem like a good idea for making a bigger return on your investment, you may be ruining your chances of success before the first lease is signed.
Properties that are located in bad areas will not attract good tenants. Even if you were to find great tenants for this type of neighborhood, they won’t end up staying for very long since bad neighborhoods tend to mean higher crime rates. Check the crime statistics of the area for a rundown on the neighborhood. You can do this by visiting the police station or public library rather than asking the current homeowner, since you most likely won’t get an honest answer anyway.

2. Jobs –

This goes along with location, which stresses the importance of location even more. If there aren’t any employment opportunities in the area, it’s going to be hard to find tenants. Choose neighborhoods that are in or within close proximity of decent-sized cities. Most people prefer a short commute to work, so anything over 45 minutes to the nearest town or city may be pushing your luck.

3. The property –

Focus on the appeal of the place. Is the kitchen large enough to accommodate a family? If there are enough bedrooms, can you rent out the apartment as student housing and charge a flat rate per tenant? What sort of heating does the place have?
Certainly, you can get more money for your investment if the place has more bedrooms. Maybe you can look into remodeling the floor plan to accommodate more people? Above all else, make sure the apartment is clean!

4. Safety first –

Safety issues often arise in old houses so be wary of this fact. A licensed home inspector can help identify potential issues including lead paint, asbestos, radon, and mold. Keep in mind also that landlords are responsible for installing smoke alarms. Check for unfenced swimming pools, broken windows, open electrical circuits, and anything else that may pose a hazard.

5. Think small –

Bigger is not always better and scaling back on property size can reduce your tax rate significantly. A smaller apartment is also cheaper to heat, which helps if you are providing utilities to the tenants.
You also don’t want to dream so big that you end up buying property out of state. Stay close to home so you can stay on top of problems and keep an eye on your investment. That buy-to-rent/let mortgage was a serious investment, so you don’t want to play the absentee landlord.

How about you all? Have you ever invested in a rental property? If so, what steps did you take to make sure it was desirable/would be rented out regularly? 

If you haven’t yet invested in a rental property, what has made you resist doing so? Was it monetary, or a desire to avoid the burden of being a landlord?

Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • Very interesting post! I like articles pertaining to becoming a landlord, as I could definitely see myself getting involved in renting out properties after finishing my graduate school program and obtaining a regular job with a more substantial salary.
  • However, the approach I would probably take is to first buy a house/condo to live in myself for several years while I made progress paying down the mortgage. Then, when I was ready to upgrade to a larger home, I would keep ownership in the old place, move in to the new house with my family (the two houses can be in the same city/location – that’s no problem), and then start renting out the previous house to tenants.
  • @ My principle concern with buying real estate just to rent it out – 
    • With the way the real estate market has been for the past several years in the US, the main worry I would have with owning a rental property is not whether I could actually do my homework properly to determine whether a place is desirable to tenants or not, but rather there is enough demand for the place to rent out in the first place.
    • For example, I currently live in a condo complex that maybe has several hundred units. However, it feels like about half of the units are empty currently. Of course, this could be related to them all being “for sale” and not an accurate reflection on the strength or weakness of the rental market. However, it still definitely prompts the question.
    • As such, before becoming a landlord, I would probably want to get a very concrete sense of the rental market overall in the town in which I lived.
    • Currently, I’m not sure of any good online resources to do this – do any of you all know of any?

***Photo courtesy of http://farm2.static.flickr.com/1406/1455052642_43acd1ab29.jpg


  1. First property should be small, I suggest your first home or condo. It is a good way to find out if you like being a landlord.

    • I agree Krantcents! How has your experience been as a landlord? Have you ever used property management companies?
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