How do you know whether or not a property would make a good investment? In today’s real estate climate, opportunities come and go in a flash. Investors must be able to quickly evaluate whether or not any given property would make a good investment – not just in general, but for their specific, unique portfolio.
Thankfully, several indicators point to a property’s potential! These are some key factors to consider:
6 Signs that a House Would Make a Great Single-Family Residence
1. It's in a fantastic location
The location of the property is crucial. Look for areas with high rental demand, good infrastructure, and proximity to highly rated schools, shopping centers, family-friendly attractions, and employment opportunities. A desirable location increases the likelihood of attracting residents and maintaining low vacancy rates. You’ll have to strike a delicate balance, though, as the most desirable areas are often more expensive. Watch your profit margins!
2. There's a robust rental market already
Research the local rental market to understand the supply and demand dynamics. Look for areas with low vacancy rates, increasing rental prices, and a stable or growing population. A solid rental market ensures consistent rental income and potential for property appreciation. Remember, you want to consider the market for your particular type of rental property. There is not always consistency between supply and demand for multifamily units and single-family rentals.
3. The numbers look favorable
Analyze the financials to determine cash flow potential. Consider factors such as property taxes, insurance, maintenance costs, potential repairs, and mortgage payments (if using financing). An excellent rental property should generate enough income to cover expenses and leave room for profit. That profit may be marginal until you pay the property off, but it should be there nonetheless!
4. It addresses resident needs
Is your property somewhere you’d want to live yourself? Even if it’s not your ideal home, you should be able to look at your properties and feel proud. You’d feel safe, comfortable, and happy staying there.
Because that’s how long-term residents feel. They won’t renew a lease for a property that is a source of safety concerns, aggravation, and strife. Does your property provide ample space, good working appliances, and a clean environment? Is there attention to detail in the renovation and maintenance of those properties?
Consider what residents want in their rental homes. It leads to more renewals and less turnover!
5. There's ample appreciation potential
What’s the potential for property appreciation outside of what you can force via renovations? Consider factors such as planned developments, infrastructure projects, and economic growth in the area. Look at historical price fluctuations (particularly during economic crises) and trends. Take note of property performance in both favorable and unfavorable periods. It’s not enough to know that a property will grow in value – most do. It’s about how quickly values will bounce back under challenging conditions. Properties in expanding, healthy markets mean long-term, lasting value for you!
6. You can manage it well
While you can’t evaluate management potential by looking at a property, know that it’s necessary for your success. Poor management can ruin a great opportunity. The property can be in the right location and have all the right amenities, the best layout, storage space, appliances, and perks…but if it’s poorly managed, it won’t make a difference.
You need a team that will preserve and protect the value of your investment. That means managers facilitate lease renewals and prevent vacancies by serving residents well. They take good care of your property. They fix problems promptly and correctly.
The Turnkey Equation
Of course, you don’t necessarily need to be a master of property analytics to succeed in real estate investment. Leverage the expertise of a turnkey company. For our part, REI Nation has been doing this for twenty years and counting. We’ve been in business during some of the greatest economic challenges of our lifetime – and we’re still going strong.
Let a turnkey provider help you identify excellent investment properties in key markets. You won’t regret it!
Ultimately, though, due diligence is your responsibility as an investor. Take nothing on faith! Conduct thorough research and financial analysis before investing in a rental property. Consulting with real estate professionals, property managers, or experienced investors provides valuable insights and helps you make informed decisions.
Buy the right property in the right market with the right team.