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3 Hot Tips For Investing In Rental Properties

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Real Estate

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									3 Hot Tips For Investing In Rental
Properties
Choosing the right investment property, especially for a newbie investor, can sometimes
seem to be a daunting task. But choosing the right investment property can also be a
challenge for seasoned investors. There are three things I look for when choosing an
investment property: long term growth potential, tenant "attractability", and cost of
ownership.

Long-Term Growth Potential

Most investors are taught that the cheaper the property, the better. This is only partially true.
Your main focus for every long-term rental property should be appreciation, or the amount
the property will increase over time. Appreciation is much more important than purchase
price. The amount the property increases over time should be substantially more than any
profits made from the buy. Because appreciation is much more important than purchase price,
there are great potential investment properties in every market. So to sum this up in one short
phrase, never buy an investment property without being confident that it will appreciate
substantially.

Tenant "Attractability"

The type of home you purchase will attract a particular type of tenant. Upscale properties
attract upscale tenants, and vice versa. It seems like common sense, but it is an absolute must
when looking for the right investment property. You want to avoid properties that attract
potential tenants who have financial distress or appear desperate. Invest in the properties that
fit into your budget, but that also will attract the best possible tenants.

Cost of Ownership

There is ALWAYS a cost of ownership. As with anything you purchase, your property will
endure wear and tear over time. The more upfront homework you do will have a great effect
on just how much wear and tear your property endures. Choosing the right tenant, for
example, will have an affect on wear and tear. The design of the interior of the house will
also determine how much your cost of ownership will be affected. Tight, narrow layouts will
suffer more damage than open layouts, for example. Tenants with children will typically
cause more wear and tear to the property than those without. Also, flat paints needs more care
than gloss or semi-gloss. Many things on the interior and exterior of a home have a
predictable shelf-life. Do your homework and calculate these things upfront and it will save
you tenfold on the back.

Understand that long term growth potential, cost of ownership, and tenant "attractability" will
greatly affect the success of your rental portfolio. These three factors should be considered
carefully before investing in any real estate property.

If you take these three factors into consideration, you will be investing with minimal risk and
the potential for great reward!

								
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