A previous Anchor Blog post provided advice on developing a total investment strategy, including the recommendation to include rental property in your portfolio to keep your business diversified. Within your overall strategy, it’s critical to have a clear plan on how to run the rental side of your business. Similar to finding the right fix-and-flip property, it’s also imperative to find the right rental property.
To achieve the best return on your rental property investment, several key factors regarding geography and property type must inform your investment decisions. Believe it or not, the old adage “location, location, location” is still applicable today and can have so many implications (both good and bad) when looking for a rental property. Location will greatly affect how much you can charge for the rental rate, and may also affect your bottom line in other ways, such as crime and vandalism, local vacancy rates and quality of local schools. Lastly, the type of rental property investment you choose must be realistic and sustainable for your business—Are single-family homes the best fit for you? Are you set up to successfully invest in multi-unit properties? Or, is your strategy to include both property types? These are important considerations.
Location, Location, Location
Consider the city and state for your rental property investment. Housing Wire stated in a recent article that in some areas of the U.S., it is cheaper to rent than to buy a home. Specifically, the data shows that 64% of the U.S. population lives in markets that are more affordable for renting than buying. In addition to the property’s city and state, look for demographically growing areas. Is there a new up-and-coming neighborhood in the city where properties may be cheaper, but have the potential to grow your equity over time?
Rental Rates
Rental rates vary drastically across the nation and have an obvious impact on a renter’s cost of living considerations. Determining what you will charge for your rental properties may also vary depending on type of dwelling, taxes, maintenance and local amenities. Do your research and review similar properties for rent. Check municipal codes and laws to ensure you follow them as a landlord, and interview property management companies for input. Bridgepoint Property Management has posted some helpful tips for determining rental rates on the Bridge Point Bridge Point website.
Types of Properties
Understanding the types of properties that are in demand could be the key to your rental success. According to National Real Estate Investor, multi-family units will continue to be a competitive rental market in 2018. Additionally, their prediction is new construction started in 2017 will carry over and be available during this year for renters. For rental success, be sure to understand the available rental inventory, and structure your offer to take advantage of gaps in your region.
Regardless of location, rate and property type, the rental market is still in demand. Take time in 2018 to review your investment strategy and diversify with rental properties. Anchor Loans provides financing for residential and commercial fix-and-flip and rental property acquisition and rehab, and can be a long-term partner to help you meet your goals.
