Buying a home to rent out can be a very lucrative investment. However before you purchase just any home, you should know what to look for. Just buying a home and hoping to make good money on it isn’t going to work. You have a lot of legwork to do before choosing just the right investment home.
Where is the Home Located?
Before you purchase an investment home, you’ll want to consider not only the home itself, but also its location. You could have the most beautiful home that suits a family of four, but if it’s in a rundown area and sticks out like a sore thumb, it won’t likely make you any money. In fact, it could be a sinking investment.
Even when you buy a home to live in as an owner-occupied property, you want to look into the neighborhood. You’re not just buying a home, but an area to live. You want it to be somewhere you feel comfortable and enjoy living. The same is true for an investment home. You want it to be somewhere where there is a large rental market and where people would want to live.
A few things you’ll want to consider is the proximity to major things like shopping malls, churches, and schools. If you are buying a home that is large enough for a family with kids, you’ll want to make sure the area is kid-friendly and that the school district is reputable.
Consider the demographics of the area. Is it better suited for retired people or young families or somewhere in between? This will help you determine if it’s a good place for a rental home. If it’s a good area for retired people, you may not have as large of a market of renters as you would if it’s an area for families just starting out.
What’s the Home’s Condition?
Next, you want to know the home’s condition. Obviously, this plays a role in the home’s value, but you need to dig deeper than that. You need to know how much work the home needs and around how much it will cost. This will help you figure out the financial aspect of the purchase.
It doesn’t matter how cheap you can get the home or how much you think you can get for rent. You have to figure in the cost of making the home livable and desirable. Remember, you are trying to appeal to an audience that has many other opportunities to rent other homes.
Once you know what repairs the home needs, you should figure out if you can afford the repairs. This means can you afford the materials as well as the labor to conduct them? If you can do them yourself, think about the time commitment. Do you have the time to make the changes within a decent period? Remember, time is money.
What’s the Market Like?
You will also want to know what the rental market is like in that area. You can have the best home at the best rental price, but if there isn’t a market, you won’t make any money. Do your research and determine what the going rent is in the area as well as what percentage of vacancy exists. If there is a large number of vacancies, you may want to look at other properties in other areas.
Figuring out if an investment home purchase is worth is a big task. You have many factors to consider outside of the value of the home. Understanding if the home will be profitable for you requires a little research as well as some guessing. The more input you have and the more time you take, the better the decision you will make.