Red Flags to Look for When Seeking Out Your First Rental Property

It’s important for any first-time investor to understand that not all rental properties are guaranteed to turn a profit. While certain properties will net you a small fortune every month, others will act as consistent drains on your financial resources. As such, when seeking out your first rental property, it pays to be as discerning as possible. The more meticulous you are in your research, the less likely you are to experience regret down the line. With this in mind, keep an eye out for the following red flags when searching for profitable investment opportunities.

lod

Low Demand for Rentals

Unsurprisingly, some areas have a much higher demand for rentals than others. Major metropolitan areas, in particular, tend to have robust demand, whereas small towns and rural communities generally have far less. (Of course, this isn’t to say that there aren’t exceptions to the rule.) Additionally, areas with a fair amount of crime and a general lack of amenities usually aren’t the best places to purchase high-rent properties.

So, even if a property seems like a great investment, just remember that it’s essentially worthless in the absence of tenants who can’t pay the desired rent. As such, make a point of researching rental rates, as well as general demand for new rentals, before investing in your first property. A little bit of research stands to save you a lot of regret, so when searching for single-family rental investment opportunities, local demand should be foremost on your mind.

Lengthy Periods Between Tenancies

Before committing to invest in a rental property, you should know how profitable this property has historically proven to be. For example, if a property tends to remain unoccupied for long periods, this should be taken as a sign of low demand in the area or general undesirability on the part of the property. Even if you think you can make a property considerably more profitable than its previous owner, lengthy periods between tenancies are never a good sign.

Undesirable Locations

If you’re thinking of investing in a property in an area with high crime rates, a poor local economy or a general lack of appeal for new arrivals, you should know that making the desired profit from this property may prove impossible. It shouldn’t come as a surprise that most people are unwilling to pay high rents to live in such areas. In fact, cheap rental rates are just about the only reason for which people relocate to undesirable locales.

Extensive Damage to the Property

Virtually any rental property you come across is going to have some degree of damage. Of course, this doesn’t mean that all property damage should be viewed as equal. While small cosmetic issues are to be expected, larger issues concerning a property’s plumbing, electricity or structure can turn almost any rental property into a money pit. For this reason, it’s strongly recommended that you never invest in a property that hasn’t been meticulously looked over by seasoned pros. The last thing you want on your hands is a fixer-upper that requires extensive repairs and/or renovations to be livable.

So, if a seller ever offers to give you a great deal on the condition that you forgo an inspection, this should be taken as a red flag. Instead of even entertaining such an offer, you’d be wise to set your sights on other prospective properties.

The Age of the Property

For the most part, older properties tend to require a greater degree of care and maintenance than newer ones. This isn’t to say that you should never consider purchasing an older property, but it does mean you should be fully aware of the exact age and maintenance history of any rental you’re thinking of purchasing. Additionally, since homeowners insurance doesn’t apply to rental properties, you should take the cost of landlord insurance into careful consideration when making your decision.

age

To say that a lot of money is at stake with the average rental property investment would be an understatement. While a good property in a desirable area is liable to run you quite a bit, even a lower-end rental property is likely to place a strain on your finances. That being the case, you should familiarize yourself with the various red flags that experienced investors instinctively look for. Learning to recognize red flags can prevent you from making bad investments and help ensure that your resources only go towards profitable properties.

Tags:
IPS, No PR, Wire

iCrowdNewswire