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When you buy a home, you can to turn it into an investment property and rent out the home in the future. As you look at homes for sale, there are some factors you should keep in mind when choosing a home to buy that you can turn into a rental investment. Here are two tips to use to help guide you in making a smart investment and home buying decision.
Buy a Home Renters Want to Rent
When you are viewing properties to potentially buy, it can become easy to get emotionally attached to a property with features you prefer. But, when you are buying a home as a future rental property, look for a home with the types of features that will be attractive to the most renters. For example, if you buy a home with a fenced yard, it can make your property attractive to families with children or pets. A family with small children will like the security a fenced-in yard offers them. And, if the family owns one or more dogs, a fenced-in yard will be beneficial to them. Also, consider the parking situation outside a home you may invest in as a rental property. A rental home with designated or reserved parking is more attractive to renters than a home without parking.
You should also look at the features inside the property. It is better to buy a house that has at least two or three bedrooms and two bathrooms than a home with only one bedroom and one bathroom. This gives potential renters more space they want and need. Then, with more bedrooms, you will be able to charge more to rent the home.
Certain amenities in the home, such as washer and dryer hookups and a dishwasher, can also increase the home's attractiveness to renters. Then, having a basement or some type of extra storage space in the home can make your home a more desirable rental.
Look for Positive Cash Flow
When you are considering a home to buy as a future rental, find out how much similar properties are renting for in the area. You can do this by browsing local property management websites to find out what they are charging for rent on their properties. Professional property management companies will be renting at a fair market price, so their rent numbers should be realistic. The amount of rent from your property needs to cover all the property's expenses to make it a worthwhile investment.
A good rule to use to quickly determine if a rental property will provide positive cash flow is the 1% rule. This rule states the gross monthly income of the property must be at least 1% of the purchase price. So, if a home's sale price is $200,000, you need to be able to rent it out for $2,000 per month for it to be a good investment and at least break even in cash flow. After you have eliminated any homes that don't pass this 1% rule, you can spend a little bit more time analyzing each home individually with a cash flow analysis form.
For each property you are seriously considering to buy, fill out a cash flow analysis form. This will help you take into consideration all the expenses for owning a rental property to make sure you will be able to at least breaking even. You should fill out the expenses on the cash flow form with figures that are as accurate as possible. Some of the property expenses include the mortgage, taxes and insurance, costs with maintaining the property, local water and garbage charges, and property management fees. Ask the real estate broker selling the home what the home's annual taxes are. Also, the current homeowner may be able to tell you how much their water and garbage bill is each month.
Using these two tips can help you choose a property to turn into a successful rental property. For more information, go to sites and check out homes for sale.Share