Finding the Best Market to Buy Rental Properties in This Environment
In a post-pandemic world, considering investments can be a little terrifying. Real estate, especially, is something that people are never really sure about. Fortunately, even now, there are plenty of places to look for rental properties that are not only viable but profitable. The trick is to know what you’re looking for, as well as what you should be looking for. One of the most important parts of your decision will be the market in which you choose to buy property.
In this article, we’ll go over everything that you need to know about the rental market and how to choose your spot, as well as other important details. The economy is still touch-and-go in many ways, but the housing market is booming and people will always need a place to live. Thus, it’s not about whether it’s the right choice but finding the right market.
Let’s dig in.
Do Your Homework
There is a lot to be said for taking the time to see what the market is doing. Find areas that are becoming popular among renters and younger adults, who tend to be more likely to be looking for a rental than a home to buy. For example, companies put out lists all the time of the best cities to buy real estate, the best rental communities, and more. You’ll be able to get as much information as you’re willing to look for. Consider the top cities in the U.S. as a starting point, or at least check to see if your desired area has made the list.
Consider the Market and Audience
If you want a property in a specific area, you’ll need to cater to that audience. Not only that, but you’ll have to figure out what the market is like in that area. If you don’t want college tenants, for example, you wouldn’t buy a property near the university. The types of rental properties available in various communities usually do well to reflect the population, but with the younger generation coming up, that is changing. Often, there is a bigger demand for multi-unit buildings than single-family homes in younger renters, for example.
Consider Property Types
Right now, single-family homes are popular among renters, but so are multi-family buildings that provide all the amenities and save people a ton of the chores and maintenance of owning a single-family home, or even renting one. What’s working in one market might also be different than what’s working in another market, in terms of property types. These are all things that will come up when you’re doing your homework, of course, but we wanted to highlight them to make sure that you understand the emphasis.
Look at the Numbers
Several numbers should be on your list when you’re looking for a rental property in 2021. These haven’t changed much over the years, of course, but they are more important than ever to know. You’ll want to make sure that you check out various factors in communities and neighborhoods where you’re considering buying so that you know things like:
What’s the median home value?
What is the median income in the area?
What’s the going rental rate for the property type?
How many owner-occupied homes are in the community?
What’s the employment rate like?
What are the schools like?
Answering all of these questions will ensure that you choose the best property every time, no matter what you have in mind. You wouldn’t want to buy a half-a-million-dollar family home in a neighborhood with poor schools and little to do for families, would you?
A lot of this might seem like common sense but buying rental properties can be overwhelming, so it can be helpful to lay everything out and make sure that you’re really ready for what you’re about to get into. A rental property is an investment, but it’s also going to cost you money and time. If you don’t do it right, that money and time will be wasted on fixing things and dealing with mistakes that could have otherwise been avoided, in many cases.
Jobs and Population Growth
If the “right” rental property neighborhood or city for you has plenty of jobs and potential, as well as a growing population, that’s something that should be on your radar. You obviously don’t want to invest in a neighborhood that’s on the decline, but steady or slow growth is okay, too. Just make sure it’s not stagnant.
Of course, you’ll also want to make sure that the jobs and population are on par with each other—you need people to rent your unit(s), but they also need to have jobs so they can pay rent. If there are more jobs than people, that’s not always bad. However, if there are more people than jobs, you might want to reconsider.
Things to Avoid
In addition to all of the ways to find the best rental property, you have to know what types of things you should be avoiding at all costs. Rule out any areas that have high crime rates, that have a lot of owner-occupied neighborhoods, and places that don’t fit your desired property and tenant type. You should also look out for:
Don’t buy multiple properties at once. Stick to one deal at a time, no matter how hot of a neighborhood you stumble upon. You don’t want to stretch yourself too thin, after all. The same goes with not buying something bigger than you can handle—if you want a duplex, don’t go looking for a 15-unit building.
Don’t spend more than you can afford. No matter how good the market or the neighborhood, this is an investment. You have to make sure that you don’t outprice yourself by paying too much for a property or end up with no money for repairs or maintenance. This is an investment, not your personal home, so don’t put too much emotion into it.
Avoid fixer-uppers if you’re not experienced. There is something to be said for “move-in ready” and it takes a special kind of person to pick up all these distressed properties and put them back together. The TV shows make it look a lot easier than it actually is. Save yourself the hassle and headaches, and the money, and buy something that doesn’t require a lot of work on your part. Right now, you can’t afford that.
The Final Call
It’s all about preparation, and now you’re one step closer to that with the information that you’ve gathered here. If you’re on the hunt for a good rental property, you’ll want to make sure that you take the time to consider these things. You have to know the market and have an investment strategy in place if you’re going to make the most of your investment, too. Don’t just go out and buy a property. Do your homework, find a smart investment, and then go for it.
In today’s uncertain market, homes are still in demand. However, people are pickier and there is more competition, so you have to make sure that you choose the right properties in the right neighborhoods to succeed. Some might try to tell you that you can succeed anywhere as a rental property owner if you know what you’re doing, but they’re wrong. Some markets are just plain better than others. Now, you know how to figure out which ones those are so that you can get the perfect property for your investment.