In light of how much capital is spent on most rental properties, it’s only natural that you’d want to generate as much income with them as possible. Still, if your experience in real estate investing or property ownership is minimal to nonexistent, this may be easier said than done. While there’s no surefire way to know how profitable a rental will ultimately be, there are a variety of steps you can take to prevent yourself from making unwise investments.

Get Educated 

Before diving into your first rental property investment, you’ll need to expand your knowledge of the real estate market. Unsurprisingly, this can prove particularly beneficial to first-time investors – especially ones whose market knowledge is sorely lacking. Luckily, bringing yourself up to speed on the best locations, desirable properties and high net worth investing strategies isn’t quite as daunting as you may think.

For starters, it helps to have a friend, family member or general acquaintance who has experience owning and/or managing rental properties. So, if there’s anyone in your regular circle who fits this description, don’t hesitate to get in touch with them and soak up any knowledge they’re willing to offer. In the absence of such an individual, consider reaching out to a highly-rated real estate investment company. Experienced real estate professionals will be able to walk you through the tenets of good locations, profitable properties and fair offers.   

Take a Close Look at Location 

If you’ve ever interacted with a realtor, odds are you’ve heard the mantra “Location, location, location!” However, in addition to being catchy and fun to say, said mantra carries a fair amount of truth. After all, it’s no stretch to call location the single most important factor in real estate. No matter how nice a potential investment property is, an undesirable location can majorly hinder its profitability. So, before proceeding to purchase your first rental, make sure to thoroughly research its location.

First off, you’ll need to take a close look at an area’s property values and rent prices. This will help you form an understanding of how much rentals in the area are truly worth, as well as how much income you can expect them to generate. Researching an area’s population size, growth projections, median income, local job market, crime rates and school qualities can also prove beneficial in helping you determine how much demand there is for housing.    

Get an Accurate Assessment of a Property’s Condition 

When purchasing something as expensive as a rental property, it’s in your best interest to know exactly where your capital is going. So, before making a serious offer or breaking out the paperwork, insist on having any property that’s piqued your interest inspected by a certified professional. Even if you’ve personally looked the property over and didn’t come across any problems, a formal inspection can prove beneficial for several reasons.

To start with, a professional inspection may be required for having the property insured. Secondly, an experienced inspector will be able to seek out and identify issues that you’d never think to look for. This helps ensure that you aren’t floored by the discovery of certain problems long after a sale has gone through, thus saving you a fair amount of time, money and hassle. Thirdly, the results of a professional inspection will make you aware of any repairs or renovations of which a property is currently in need. Depending on the scope of these issues – and the collective cost of addressing them – you may ultimately deem it wiser to walk away from a deal and focus on other prospective investment properties. 

So, no matter how convincing or personable a seller is, you should always insist on a pre-purchase inspection. You may very well discover that there are problems with a property that not even the seller themselves were aware of. 

 Pay Off

There’s little wonder as to why so many investors are drawn to rental properties. After all, good rentals in good areas can function as vehicles for passive income generation for years – if not generations. Of course, this isn’t to say that every rental property fits this mold, and if you aren’t careful, you’re liable to wind up with a lemon. So, if you’re currently in the market for your first rental, make sure to do your homework and put the advice outlined above to practical use.  

 

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