Things to Think About When Looking for Your First Rental Property

Investing in a good rental property can be a great way to generate passive income. The better the property and the more desirable the locale, the more you stand to rake in every month. However, as any experienced landlord can tell you, not all rental properties represent sound investments, and failing to do your homework stands to result in tremendous buyer’s remorse. So, if you’re currently looking to invest in your first rental property, take care to consider the following factors.

Location

There’s little wonder as to why so many real estate professionals love repeating the mantra, “Location, location, location!” In the rental property game, the location of a property is often regarded as more important than its size, price or overall condition. It’s hardly unusual for a property that’s lacking in space and general amenities to command high rent if it’s located in an in-demand area. Conversely, properties that are well-furnished, meticulously maintained and full of modern amenities are often unable to attract interest in areas that are considered unpopular or undesirable. 

So, before proceeding to make an offer on a property, take care to do some research on the area in which it’s located. When conducting your research, make a point of looking up local rental rates, crime rates, job market, current population and projected population growth. Depending on the results of your research, you may ultimately find that the property in question does not constitute a worthwhile investment. Fortunately for investors interested in Sarasota, FL real estate, attractive local properties shouldn’t prove difficult to locate.  

Condition

Whether you intend to rent out a property as-is or renovate it, you should never commit to purchasing without getting a firsthand look. Although some issues are extremely obvious, others are unlikely to be spotted by people with little to no experience inspecting properties. With this in mind, enlist the aid of a seasoned property inspector, as well as a knowledgeable plumber and electrician. After these individuals have thoroughly inspected the property, they’ll give you a detailed rundown of their findings, which will help you make an informed decision. Furthermore, depending on what they find, you may be able to amend your offer and request a reduction in price. 

Cost of Repairs and/or Renovations

Investing in a property that requires high-level repairs and/or renovations can be a risky venture. Depending on the cost of such an undertaking, you may ultimately lose more money than you stand to make from a certain property. So, prior to getting started on any paperwork, obtain detailed estimates for any work that needs to be done on the property. If you’re still keen on purchasing the property after seeing these estimates, request that the seller take them into account when determining the final price. Furthermore, unless you’re absolutely positive that you’ll see a handsome return on investment, abstain from purchasing properties whose repair/renovation costs exceed its value.  

Additionally, to ensure that repairs or renovations go off without a hitch, make a point of only working contractors who are fully licensed and bonded. You can help prevent yourself from getting stuck with a lemon by looking for detailed customer feedback for any contractor you’re thinking about giving your business to. For best results, seek out contractors who are experienced in doing the types of repairs or renovations you need done.  

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Cost of Insurance

When deciding whether or not to purchase a property – or how much rent to charge for a property – you’ll need to carefully consider the cost of insurance. Since homeowners insurance cannot be applied to rental properties, property owners need to seek out landlord insurance policies that are uniquely suited to their needs. Additionally, in the interest of providing your tenants with peace of mind, make sure to strongly advise them to purchase individual renters insurance policies.  

If you’re looking for a way to generate passive income on a consistent basis, investing in a rental property is certainly worth considering. However, as anyone with experience in this field can attest, not every rental property investment is a slam dunk. While some properties will rake in a small fortune every month, others will serve no purpose outside of draining your finances. In the interest of seeing a favorable return on your investment, remember to consider the previously discussed factors when seeking out your first rental property.   

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