Ideal Rental Properties
- Cash flow. Difference between house payment (Principal, interest, taxes and insurance) and rent. Obviously the bigger the cash flow the better
- Future equity potential. If you buy a property in an area that should be gaining in equity or popularity in the future. This is always a guess.
- Good schools. You will always have demand.
- 4 bedrooms is better than 3 if you are renting to someone with children.
- No pool. Added expense and liability. Although these do seem to be rented faster
- Easy access to highways
- Newer the better because you do not have deferred maintenance. This is obviously not always possible.
- Really good price in a popular area.
- Driving distance from your home if you are going to manage it yourself
- Low crime/few sex offenders
- Near shopping, parks, public transportation
- Master downstairs. 2 car garage, more than one bathroom
- Areas where history shows rental properties rent quickly
Should I buy a home that needs repairs?
You will almost always find a better bargain on a home that needs repairs. If you are paying cash and the home needs a roof or foundation, it should be severely discounted because non-cash homebuyers will not be able to get a loan on the house.
You will need a trusted contractor to do the work. The most important thing to remember is that you are not going to be living there. Repair the house in a manner that fits the socio-economics of the area. A cheap pergo type floor might be ok in some areas of town and not so good in others.
Obviously the cost of repairs should be rolled into your financial analysis to determine if it is a good investment property.
Who do you want your tenants to be?
The ideal tenant is one who takes care of the property well, has no pets or children that damage it, wants to live there for a long time and has a stable job where they pay rent on time and they have great credit. Obviously this type of person would probably buy instead of rent and there aren’t many people like this. How close can you get to this is the question.
We cannot discriminate against people based on the items below. However, know what your preferences are will help you get started in selecting the best part of town.
- Students. You will have high turnover and possible problems with maintenance. But there will always be another tenant right around the corner.
- What ethnic demographic? Some people have preferences on ethnicity. None are good or bad but knowing your preference might help you with a particular part of town.
- What income demographic. Do you want blue collar or white collar?
- Do you want younger or older , single, married with no kids, married with kids, roommate situations, straight vs gay?
How do I get the property rented?
1.You can hire a property management company who will rent the property for you and take care of the property for typically 10% a month. The rental fee for the property is usually 1 month’s rent.
2. You can hire a Realtor to put it in MLS and market it for rent. The fee is typically one months rent. You then manage the property yourself.
3. You run an ad on craig’s list and put a sign in the yard and maybe an ad in newspaper
Who runs the credit check?
The property management company or Realtor use companies to run credit checks and criminal background checks. If you prefer to do it yourself, they can give the names of companies to call.
In today’s world expect to see a lot of applicants with credit issues. Ask for a letter of explanation and then decide if the risk is too high or not. We often ask for 2 months rent as deposit for people with poor credit.