If you have decided that you want to jump into the residential property rental market, you want to make sure that you are making a solid investment that will pay off for you in the long-term. Here are three tips to keep in mind that will help you find success as you enter the residential property rental market.
#1 Always Go For The Discount
When purchasing a residential property for the purpose of renting it out, you should not be looking to pay above or at market value. In order to ensure that your investment makes you money in the future, try to secure a property that is selling at below current market value. When purchasing a residential property rental, you want to close the deal and ensure that you have equity in the home. You don't want to purchase a home that leaves you without any equity. The equity can save you if and when you need to sell the home, and it can make it a better investment option.
#2 Figure Out Rental Costs
Before you purchase a rental property, you should have a solid idea of what it will cost you to rent the property. That means you need to figure out what your mortgage rate will be, how much insurance will cost you, and how much repairs and property management is going to cost you on a monthly basis.
From there, figure out how much the property will cost you every month and how much rent you will have to charge to cover those costs. The cost of your rent should allow you to build some extra cash flow as well that you can invest back into the home or mortgage payments. For example, if your monthly costs for the home will be $600 dollars, you would want to make sure that the rental market would support rent somewhere between $700- $800 dollars a month. You should be making some money on your rent and should figure out up front if you will actually be able to do that with the property that you are looking at.
#3 Research The Rental Market
Make sure that you really research the rental market in your area. Look at all the listings in the area that are similar to your own. See what is included in the rent and how much those homes are charging for rent. Tour and look at similar places that are for rent and figure out what the standards of quality are for rentals in the price range that you want to purchase.
Make sure that the home that you are interested in purchasing meets or exceeds the standard for homes in the area. Really researching and viewing rental properties in your area will help you get a better feel for the market and will help you better identify when you see a good deal.