When the idea to purchase a rental property comes along what factors actually make a good rental property? There’s a number of things to investigate along the way to generating that passive income. Here’s a list of several factors to consider when deciding what makes a good rental property.
Price of Rent in an Area
Determining the price of a rental is one of the most important factors. If a market cannot sustain what is necessary for you to profit from your investment then it isn’t a viable rental property. A real estate agent can generally look at what rentals have been in the area and compare it to the neighborhood, square footage, and type of homes.
Resale Value for your Rental Property
It’s a good bet that you won’t want to keep the same investment property forever. As home values increase you may want to liquidate the investment then reallocate it to another rental or simple cash out. It’s impossible to predict the future but you can make some educated guesses based on the growth trends in an area.
Upkeep on the Home
An older home will need more repairs than a brand new one. Depending on the age of the home and how it’s been kept up you may end up with significant repairs which you will be responsible for. This shouldn’t rule out a home necessarily but is a factor in determining your expenses and profit. Be critical of a home’s major systems and realistic on the potential costs of the HVAC, roof, electric, structural, and anything you deem important. Home inspections are a must with a potential rental property!
Demand for Rentals in the Area
If you are in an area (like Middle TN which is bursting with growth) then you are seeing a lot of jobs and people moving to the area. Most people want to stay within an easy commuting distance of work. No more than 30 minutes away from a major area is probably a safe distance to assume. Plan your rental areas so that your rental property is within that commuting circle. Keep in mind that generally the closer you are to the growth the more you can charge for rent.
What creates the demand? Jobs, jobs, and jobs!
I’ve heard this before maybe you have too:
Potential investor buys a home in a neighborhood and finds out later that the restrictions do not allow it!
Always, always, always check the restrictions prior to purchase. In fact you can even make your offer contingent on the home being approved as a rental property if there is an HOA that oversees the neighborhood. Sometimes the restrictions allow a certain percentage of rentals in a neighborhood. Then you really have to make certain that you can get approval.
Your Rental Property Evaluation
All of the above factors are things a real estate agent can help you with. If you are looking for an investment opportunity contact me and let’s see how we can get you started!
Potential Middle TN Properties for Investing
Search the listings below to see what properties are available today. These listings cover the Middle TN areas of Franklin, Spring Hill, Brentwood, Columbia, and Murfreesboro.
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