What Are The Deal Breakers That You Should Look For Before Investing In Rental Properties?
Investing in rental properties is a great way to build wealth and passive income but, the truth about real estate investing is that there can also be a downside to it if an investor is not truly prepared to invest in rental properties.
Thankfully, if you’re planning on investing in rental properties for the first time, you can avoid the pitfalls that many first-time investors have experienced over the years if you know which ‘deal-breakers’ you should be on the lookout for before you invest in your first rental property.
Rental Property Deal Breakers
The first rental property deal-breaker. You should be on the lookout for before investing in a new rental property is declining property values.
This is important because, if a neighborhood has declining values, by up to 30%, this means that you could face a very difficult time renting it, even if you’re able to purchase it for a low price.
High Vacancy Rate
As a real estate investor, you have to understand that vacancy rates are normal, and it’s not uncommon for any city to have a vacancy rate of at least 5%.
You should be concerned though if you identify what looks like a great area but you find out that it has a vacancy rate of 30% or higher.
High vacancy rates mean that something is wrong under the surface and it could be anything ranging from a lack of jobs in the area, or another issue which is causing people to move out of that area faster than they’re moving in.
More People Are Moving Away
Besides paying close attention to the vacancy rate, you should also learn more about the area and find out if more people are moving away from that city, compared to moving in.
If more people are moving away, as we mentioned above, it could be due to a lack of jobs, higher taxes, for other issues which make the city a less-than-ideal place for renters to have economic and social stability.
Thankfully, the internet has a wide variety of websites and other tools that you can use to research a city before you invest there. You should specifically look at population growth over the last 100 years so that you can find out which cities are currently experiencing consistent growth or may be on the decline.
Struggling Jobs Market
Another thing to be looking for before you invest in a new rental property is to take a deep dive into the job market. Specifically, you want to identify how close the rental is to employers in the area because, as a landlord, you need to know how long your tenants are going to have to commute to work each day.
You should also identify if the rental market is tied to one employer and may be adversely affected by the ups and downs of the economy.
A good example of this is General Motors in Detroit, their local economy has been hit hard by the ups and downs of the automotive market.
Any city that is specifically tied to a single industry is not a good place to invest because, if there is a lack of demand for the product that’s produced in that city, the employers in the area will lay off people. This has a trickle-down effect because, once employees get laid off, they may be unable to pay their rents and, landlords are always affected in the end.
The Area Is Too Rural
Last of all, but most important, another deal-breaker that you should be on the lookout for before investing in a new rental property is an area that’s too rural.
This is important because if the rental property is located in an area that’s far from major employers, restaurants, shops, stores, or things to do in the area, it may be more difficult to find prospective tenants who want to live there.
Hire A Property Management Company
Once you invest in a great rental property, the next thing that you want to do is hire a property management company to professionally manage that rental property for you
Property management is the key to success with owning rental properties because a property manager will save you the hassle of managing that property yourself so that you can focus on growing your portfolio of investment properties while the property manager does all the work for you.
Contact Rent Portland Homes – Professionals
At Rent Portland Homes – Professionals, we specialize in full-service property management including property marketing, tenant screening, tenant selection, maintenance, customer service, and more!
With our property management team managing your Portland area rental property, you can have confidence in the quality of our Property Management Services. This means that you can continue enjoying the passive income that comes from your rental property regardless if you live in the Portland area, or elsewhere across the United States.
To learn more about the property management services that we can offer you, contact us today by calling (503) 447-7735, or click here to connect with us online.