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6 Signs of a Profitable Rental Property

Many people believe that a rental property is an easy, fast way to make an extensive amount of income. However, veteran landlords know that it’s not always a simple process. To make a profit, you need the right tenants, and you also need to buy the right rental property. 

How do you know if a property will make a good rental home? Here are six of the most important factors to consider.

Neighborhood

Healthy neighborhoods have higher occupancy rates. A desirable neighborhood has plenty of curb appeal. It looks clean and well taken care of. You won’t see rows of empty homes with “For Sale” signs on the lawn, and there aren’t abandoned houses with boarded-up doors and windows. If most residents in an area are homeowners, that’s a good sign that the neighborhood is one where people want to stay long-term and raise a family.

Nearby amenities such as parks, gyms, shopping centers, and public transportation also make a neighborhood more desirable to prospective tenants.  

Good Schools Nearby

If you plan on renting to families with children, it’s important to consider the quality of the local schools. When they’re looking for a home, many parents prioritize finding good schools ahead of other factors. A rental property that’s otherwise good will be less attractive to families if the nearby schools are poorly rated. 

Low Crime Rates

Good tenants will always be attracted to low-crime neighborhoods. No one wants to live in a place where they don’t feel safe. When looking for a rental property, research the local crime rates. Find out the rates of vandalism, petty crimes, and serious crimes. Contact the local police department or visit the public library to get accurate crime statistics. The lower the crime rate, the more likely it is that tenants will want to stay long-term. 

Nearby Job Opportunities

An area with a growing job market will attract more people, and therefore more potential tenants. Companies expanding into a neighborhood and new businesses opening up are good signs. Positive job growth also indicates that tenants have a good chance of staying employed and not losing their jobs due to a weak economy. You can research the neighborhood job market on the U.S. Bureau of Labor Statistics website (www.bls.gov).

Reasonable Rent

When you’re looking for a rental property, always take the average rent for the area into account. The rent you take in must be enough to cover your mortgage payment, property taxes, and expenses. If the rent you’d need to charge is much higher than the average rate, look for a property elsewhere. 

Insurance and Property Taxes

Property taxes and insurance are expenses that you must subtract from your bottom line. If an area is prone to flooding or natural disasters, the required insurance can eat into your rental income. High property taxes can also lower your profits.  

While there’s no way to guarantee that a specific rental property will be profitable, if you can check off most or all of these indicators, it’s more likely that the rental home you’re considering is a good investment. 

About Travis Wright

Hi! I'm the owner of Let's Grow Real Estate and Full Circle Clothing. I love writing, creating businesses and investing.

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One comment

  1. That’s a good point that you would want to have a popular neighborhood to have the property in. I would think that would mean that more people would be looking at places in the area. I’ll have to be sure to look into that if I decide to invest in some rental properties.

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