When looking into rental real estate, you want to review these 5 features of a profitable rental property. If you are considering earning more but can’t work more than your current 9-5 job, passive income would sound very appealing. But what exactly is a passive income?
As defined in Investopedia, “passive income is earning an individual derives from a rental property, limited partnership, or other enterprise in which he or she is not actively involved.”
Buying a home and becoming a landlord is one of the most popular sources of a passive income. Investing in a home is one of the most popular long-term passive income strategies and for good reason. According to a Harvard research, the number of households who rent has increased from 31% in 2004 to 45% in 2014.
Now is the perfect time to invest to in a rental home.
A properly managed rental property produces monthly income that keeps your cash flow liquid. Constantly generating monthly income enough to keep your home never have to sell it.
Here are 5 features of a profitable rental property.
1. Find a property in a good neighborhood
A home in a good neighborhood looks very attractive in the market. Tenants are becoming more vigilant about the home they want to live. Tenants do their due diligence of researching about their new home. Everything from good schools to knowing that the neighborhood is safe with low criminal rate will definitely help keep your home occupied.
2. Job Market
Adequate job opportunities tend to attract more people and this means more tenants. As part of your research, you might want to look in to the job availability of the investment home you want purchase. You can go to US Bureau of Labor Statistics or to the local library to know how the economic is going of your prospect home.
Take a good look at the attraction of your potential home. A home with a nearby mall, gym, parks, pool or public transportation is easy, are attractive points for tenants.
4. Rental Rate to Purchase Price
Understanding the rental rate for the area that you are interested in helps make a better investment decision. If the purchase price + repairs of the home is $100,000, you should expect a minimum rent amount of $800.00 per month. The more rent you can command – the better the purchase will be.
Looking for home with all the above characteristics should provide you with a home that will increase in value over time. This is where a lot of investor build their wealth. While you can’t eat appreciation – it does allow for your overall net worth to increase. Adding to your bottom line in the future.
Bonus: A professional managed property will net you more income in the long run than trying to manage the property yourself. We have seen over and over again where an individual tried to manage on their own only to make some fatal mistakes and end up losing all their profit with one poor decision. While manage does cost, a good property manager will make your return stronger over the long haul. Want a guide to helping you select your next property manager? Sign up here for your free report.