To Buy Or Not To Buy

Posted on: 18 October 2016

You've decided to take the plunge into real estate investing to secure your financial future, and you want to start off with single-family rental homes. You're eager to purchase your first property and start collecting monthly rent payments, but you're apprehensive that you'll make a mistake. Here are some things to consider before you make that first purchase.

The Right Property at the Right Price

Finding the right property at the right doesn't sound that difficult, right? But in reality, it takes a lot of work so you don't make a mistake that will delay your financial goals and perhaps even derail your investment plans.

First, of course, you'll need to know what you can afford. You'll need to consider not only the purchase price, but costs such as mortgage interest, marketing costs, insurance, legal fees and maintenance and repair costs. If you have few funds, you'll likely want to receive enough cash flow to cover the mortgage and expenses, which will influence the type of property you purchase. With the future of the housing market always in flux, you may not want to rely solely on appreciation of your investment.

However, there's a lot more to buying a rental property than finding a bargain that will provide good cash flow. There are other things you need to consider that will affect your ability to rent the property.

A Property Where People Want to Live

You need to remember the key to a good rental property is desirability. Vacancies are expensive. Will people want to live there? Here are some factors to consider: 

Neighborhood. You'll attract higher-class residents if the neighborhood is decent, rather buying a fixer upper in a run-down neighborhood. If the potential property is near a college or university, you'll likely get student renters and have yearly vacancies to fill. If you choose a property in a middle-class neighborhood, you'll likely get more stable, middle-class families that will stay longer term.

School districts. Investigate schools. Schools with a good reputation will attract solid middle-class families that place a high value on a quality education for their children.

Amenities. A property close to shopping centers, public transportation routes, parks, movie theaters, etc., are more desirable and usually easier to rent.

Job market. People move to where they can find jobs, which increases your pool of potential renters. Investigate the current companies in the area, as well as what development might be planned for the future. Are there plenty of desirable employment opportunities in the area, or is there an undesirable industrial complex planned for the near future?

Natural disasters. Is the area surrounding your potential property purchase in a flood plain or prone to earthquakes or hurricanes? This may influence the desirability for tenants as well as increase your insurance costs.

Investing in rental property is not an easy, get-rich quick scheme. It takes a lot of research and footwork to find a property that fits into your financial goals. A good real estate agent can do much of that work for you so you can concentrate on finding and keeping quality tenants.