The first rule of investment is to diversify your investment portfolio for steady income. Successful investors can vouch that investing in real estate is a surefire way to generate passive income.
Having said that, buying your first-ever residential property is a daunting task. You’ll have to consider several things—for instance, your goals, financial capabilities and what constitutes a profitable rental property.
There’s only so much a person can do, and we know the taxing task of searching the real estate market to find just the right property. As property managers, we’re here to help you scour your way through finding a profitable rental property.
8 Signs a Rental Property is Profitable
If you’re investing in rental property, your goal is definitely to earn profit. So when you assess a property for investment, keep in mind the following criteria that renters find valuable:
1. Property Location
We can’t stress enough this, but the location is one of the top three things people consider when renting a house. A prospective renter will desire convenience and modern-day amenities. No one would want to move into an area where running errands feels like a hassle.
A profitable rental property should offer convenience, major city attractions and access to public transportation and facilities. Suppose the area doesn’t have a grocery store, nightlife attractions or good restaurants. In that case, the property won’t appeal to most prospective tenants.
2. Crime Rate
This is stating the obvious, but your prospective tenants wouldn’t want to live in an unsafe area. Aggravated assault and robbery affects housing values, a 2010 study notes. It would help if you researched the crime rate and safety of the area before you make a purchase. Although you’d find deals at low cost in riskier areas because of the higher crime rate, the rent would also be low with high turnover. It’s better to invest in a safe location with clear statistics.
3. Friendly Neighborhood
A good neighborhood is one of the deciding factors that renters consider. Is the neighborhood a sought-after area among renters? Does the area have better educational institutes such as schools and colleges? The kind of residents living in an area also makes a property worthwhile.
Remember that renters are not only paying for renting your property; they are also paying for the neighborhood they live in. Choose your property in a high-end area or a highly desired location.
4. Career Opportunities
There need to be abundant job opportunities for people in an area. Most people, especially families and couples, prefer to live where they can find jobs easily. How do you expect to get your rent on time if your renters cannot even find work to make ends meet?
So an area with plenty of career opportunities is ultimately the best choice for prospective tenants. Of course, your property needs to meet other criteria, but this adds another star to your property.
If a big firm is switching to a new location or opening another branch, it quickly makes the property a profitable choice. Why? Because most of the employees would choose to move to a nearby location for an easy commute to and from their place.
5. Natural Calamities
As a property owner, you know how important it is to get insurance. But do you know you have to pay higher insurance if your property is in natural disaster-ridden areas? Although Washington State is ranked in the top three safest states to live in, some of the common natural disasters, including severe storms, floods, wildfires, and landslides, can occur.
Pro Tip: surf the internet to discover frequent natural disasters in an area. You can also check schools, crime rates and much more with a few clicks.
6. Vacancy Rate
Vacancy rates tell more about an area if you look closely. Suppose a neighborhood has an unusual number of vacancies or listings. In that case, you should be wary of investing in such an area. For one, vacant homes can devalue your property and indicate poor location.
We have already established the importance of a good neighborhood and location. Higher vacancy rates are one way to determine whether the property you’re planning to invest in is a profitable location.
Recommended Read: What is the Best Time To List A Property for Rental?
7. Amenities & Lifestyle
Renters pay for more than the property. They also pay for the lifestyle that comes with living in a certain area. Tenants look for external amenities, such as convenient shopping, annual festivals and entertainment and recreation options.
These factors play a significant role in increasing the value of your property. You can leverage these amenities to market your property on high-traffic sites with us. We will use high-quality photographs with detailed marketing descriptions to showcase your unique home.
8. Average Rent
Your monthly rent will impact the profit margins. So your goal should be to get the best returns. The going rental rates of nearby properties can further confirm whether the property is profitable. Use the data from the market and compare the average rent of similar properties using the 50% rule, cap formula and 1% rule.
Maintain the rent close to the average rent in the market. If the average doesn’t cover the amount you have paid for the property, then look for a more suited property that meets your financial needs.
All-Inclusive Residential Property Management in Washington
Are you ready to rent out your property? With our all-inclusive complete set of residential property management services, you can live with peace of mind. At Sensible Home Management, we focus on affordability, convenience and modern solutions for property management in Washington.
Our rental property management services include tenant screening, property inspection, leasing services, advertising and 24/7 emergency and maintenance services. We’re the most trusted team of property managers dedicated to helping residents of Federal Way, Pierce County, and King County make the most out of their rental property.
Our property management services software is an integrated modern-day solution for all your rental property management needs. Get in touch with us for further inquiries.