The 10 Top Features Of A Profitable Rental Property
The decision to invest in a residential rental property is exciting, yet risky at the same time. Whilst you will always look to find a property that holds its initial value and grows with inflation. You may be asking yourself what you should be looking for when identifying a rental property to invest in.
The key is patience. Looking for the right things to ensure minimal work needs to be done before the property is functional. The key to a profitable rental property is attracting the right tenants and being able to charge enough rent to make a profit. With this in mind, we look to discuss our top 10 features of a profitable rental property.
1 – Good Schools
Look for properties with good local schools. These will attract more families as potential tenants. Families tend to be reliable for year-round rental payments as their children become settled at their new school. Longer tenancies with families are more likely with good primary and secondary schools in the area.
2 – Low crime rate
The crime rate of an area will be a factor in your tenant’s decision. Therefore, it is ideal to find a property that is based in a low crime rate area. A scenario that often occurs, is that a potential tenant will be enticed by an advert. They will then make an inquiry, however after further research into the area. They will discover a high crime rate and be put off. Petty theft and car crimes are big detractors to property values and the prices that landlords can charge for rent. It is important to consider this when looking for a profitable rental property.
3 – Garden
If a prospective tenant is looking to buy a small family home to rent, having a garden or space for a garden will make your property much more desirable. Every family wants their own space for the kids to run around safely, have barbecues in the summer and allow the family pets to roam around in. Having a garden will also allow you to charge more rent and still attract your ideal tenant.
4 – The average rent in the area
This comes with assessing the local area. When completing a search, it’s important to look at the average rent for similar properties in the area, as this will tend to be the going rate. If the average rent of the property will be too low to cover all of the costs associated with being a landlord, such as a mortgage and other fees then forget that property.
5 – The type of area
Is the property in a modern city with vibrant nightlife and plenty of amenities? Or is it in a village with some key local amenities more suited to a quiet life? Keep your ideal tenant in mind when looking at areas to purchase property in. A young professional will want to be as close to the city they work in as possible, as they seek out good nightlife locations and other social things to do in the area. In contrast, some people prefer to live in a quieter location and have more space; along with lower crime rates and good schools.
6 – Age of the property
Although they do bring charm, properties that have aged tend to bring several issues that are difficult and expensive to fix, including asbestos, window replacements, or a new heating system. There can also be issues with some new builds, particularly ones that are rushed to be built to a deadline. There have been examples of some new builds being built on unstable ground and sinking slowly into the earth. It’s important to look at the age of a property when considering whether it will be a profitable rental property, which comes with having all the relevant safety checks completed by a quality surveyor.
7 – What issues does the property need fixing?
Having to fix a number of issues with your property before it can be put on the rental market eats away at profits in two major ways. One is the time it will take which reduces the amount of time you can have tenants in there paying rent. The other is the cost of having these problems highlighted to you as well as the cost of having them fixed. Highlight all issues, the time they will take to be fixed, and the costs so you know where you stand before making any decisions.
8 – Transport links
What are the transport links like in the area? The key to a profitable rental property is to have solid transport links available in the area. Are there good train links in town? How are the roads? Are they constantly in disrepair or being fixed? This will definitely affect the potential profit of your rental property so be sure to consider this when looking around.
9 – Vacancy rates
Another factor to consider when looking for a profitable rental property is the vacancy rates in the area. An area with high vacancy rates will mean that other landlords are having to reduce the rates of rent that they charge to keep up. Looking at the trends of vacancy rates over time is useful as well. These can be particularly relevant in university towns/cities where students rent for the term time and tend to vacate in the summer periods.
10 – Can you afford the property?
The last (and most obvious) thing to think about when purchasing a profitable rental property is whether you can afford all of the payments involved. Paying the mortgage, solicitor fees, and other expenses can really add up. Mortgage lenders also tend to require a higher deposit when you are buying to rent. Look at what rent you will likely be charging, what your expenses will be, and find the difference. You must then take into account how likely you are to have this income coming in securely every month wherever possible. Don’t take these decisions lightly as it can be difficult and take months to sell your property once it has been purchased.
If you follow these tips and decide to dip into the buy to rent market. Factor in a property management company to handle all of the drawn-out processes following the purchase.
These include quarterly property inspections, managing maintenance, collection of rent, marketing, accompanied views, and more. Here at Level UP Property management, we can help you with all of this and more. If you would like to find out more about the residential property management services we offer, please get in contact with us today.