Rents
Let’s get right to the point. You want the highest rent you can receive. After all this is a business you are entering into. Define for yourself what this number is and find out how you can receive this level of rent. This is very important since the rent needs to be enough to cover your mortgage payment, taxes, insurance & other expenses.
Taxes, Fees, Assessments: Consider what these are and add them to your expenses. Excellent neighborhoods may have higher taxes and parking fees but usually will attract higher paying tenants who will stay longer. Excellent schools will also attract longer term tenants.
Cash flow: Consider how much you are looking to receive after all expenses are paid. Keep track of what the homes are selling for in the area and the appreciation rates. If the property needs work, consider how much it will cost for renovation before the property could be rented.
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Consider a longer lease to lock in your rent for a longer period of time. It might be better to know that you have guaranteed rent, than to have a vacancy for indefinite time.
Reserves: This should be the first step in purchasing rental property to make sure you have some reserve to cover you for the times when you don’t have renters. Initially you might have to do some repairs, or renovations before you advertize the property for rent. You may have some lag time in between renters. For this reason many banks are requiring 6-9 months of reserves to cover lost rents, insurance, taxes and other expenses. Cash buyers may want to follow these guidelines as well.
Vacancies: There is little control when it comes to vacancies. A lease will offer protection for a period of time. Try to find tenants willing to sign a longer lease. Areas that are popular to live, will tend to have lower turnover rates than other areas.
Jobs: Even quiet suburbs can have room for business expansion. For example take two areas Redwood Shores & Pleasanton. These sleepy towns welcomed some large companies and in turn these companies created jobs, which led to more construction and more desirability, which led to higher home prices. Plain truth is people prefer to live closer to work & will factor in the higher cost of living vs the long commute.
Location: If you plan to manage the rental yourself consider how far it is located from where you are. You may find it well worth your while to hire a manager if you are purchased more than one unit (as in a duplex, tri, or fourplex or more units as in apartment building.
Within any city or town are pockets of areas which are more popular than others, such as near universities, beach towns or beach village communities, major financial district or job center. These areas are usually easier to rent than others and would probably generate a higher rent as well. However, these same locations could have higher turnover than others due to the nature of the tenants (students, visitors, vacationers etc).
Schools: Quality of the school as this can affect the value of your investment. Great schools attract long term tenants. Should those tenants leave for any reason, new tenants would be also easy to find. You may even have too many to choose from; this is good!
Amenities It always great to have neighborhood parks, malls, gyms, movie theaters, &public transport nearby, however most suburbs are now well enough connected with these amenities already.
Many vacation rental properties are located in resort locations, where there are even more attractions for visitors and short term renters. Vacation properties may have other considerations too Nevertheless, many second home buyers are looking to purchase a vacation home which they also intend to rent out for additional income Multi-plex dwellings lend themselves well to this endeavour.
You may be aware of areas which already have condos, business parks or malls established. These are popular with many commuters and are often well connected to train, rail or bus.
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Now is the time to buy: Begin by selecting your town or city of interest.. Then talk to renters and homeowners in the neighborhood.
Renters will be far more honest about the negative aspects of the area because they have no investment in it. Also talk with local store owners & restaurant workers , in the local strip mall . You may be surprised how much you will learn about the neighborhood.
2012 is the year of the investor /rental property owner/second home buyer. Don’t miss out on the chance to make that purchase of a lifetime! Serena is a Realtor & property manager in the bay area. Meet with Serena for your free consultation, and to begin your search for that perfect rental property. Call or text (510) 303-2549.
