When you are looking for a house to buy and rent out, there are some calculations you need to make before you put in an offer to purchase a property. Here are some recommendations to help you with these essential steps in the search for an investment rental property.
Look at the Local Rental Market
Before you start evaluating the potential for a rental property as an investment, you want to do some research in the area to help you find and purchase a profitable rental. You want to find out what types of rental properties are more popular and how much renters are willing to pay. The cost of real estate has gone up in many areas of the country, and as a result, rental rates are similarly high. But you need to look at statistics and rental figures in the area you are looking within so you know what type of market you are getting into. One area may rent out three-bedroom and two-bathroom homes for $2,000, whereas in another market they may only rent for $1,100 or less.
Take some time to call around on various properties and homes that are for rent to find out what landlords are asking. You can also visit property management websites to see what rentals they have available.
It is also going to be helpful if you find out what type of renters are living in the area. For example, is it a college or university market with many students looking for rent, or is it mainly white-collar workers that live in the area and work in the nearby city? If you are looking into a college area, you might be able to rent out your property by the room, as this is how a majority of students look for housing.
Calculate Your Property Costs
Anytime you find a property for sale that appears to have good rental property potential, you should always look at the numbers associated with the property. When you analyze a property's numbers, you calculate the property's expenses and also compare this to how much you can collect in rent. This type of cash flow analysis is going to give you a good indication of if the property will be a good investment or not.
A potential rental property's expenses are going to include the maintenance for its landscaping and exterior along with the interior. Then, you need to allow for the financing costs, which include the mortgage payment with the loan. Don't forget to calculate the property's hazard insurance and property taxes along with any water, sewer, and garbage costs, which are going to be your responsibility as the property owner. In many areas, if you don't pay the city utility bill, it will go against the property's title as a county lien until it is paid.
To learn more, contact a resource that has real estate for sale.