A Guide to Evaluating and Purchasing Rental Properties

Melissa Hill

09/20/22

Investing in real estate has always been considered a very profitable line of business. However, investing in rental properties has its difficulties when compared to traditional real estate investment. When looking into rental properties, there are many more things to consider, and certain factors become even more important. Additionally, dealing with tenants is another essential factor to keep in mind. However, before you get to the tenants, you have to think about actually getting some rental properties. This process comes with unique problems and complications that you must consider. In order to help you out, we've put together a guide to evaluating and purchasing rental properties.

Understand the expenses of rental properties

Before you can begin evaluating and purchasing rental properties, you need to understand what you're getting into. Even the cheapest rental property comes with a lot of costs you might not expect. Of course, there are obvious ones, such as cleaning, maintenance, and monthly utilities, but others are specific to rentals. The most common ones are insurance premiums, HOA fees, legal and management fees, and advertising and marketing. So, before you consider how to make a winning offer on a home, go through your budget and think carefully if you can handle a rental property in the first place. These prices vary wildly from place to place, so do thorough research before coming to conclusions. You need to ensure that the profit the property brings will be higher than the cost of maintaining it, after all, so be careful.

Before buying a rental property, make sure you can afford it in the long run.

Be very picky with location

Location plays a huge role when looking for a home for yourself or as an investment. However, in traditional investment, you can still sell the home for a profit even if the location isn't perfect. When it comes to rentals, however, you have to keep in mind that every time you're looking for a tenant is like selling the home. As such, if the home is in a bad or inconvenient location, you likely won't get many tenants. So, to put it simply, location is significantly more important when it comes to rental properties.

This should always be on your mind when evaluating and purchasing rental properties. Additionally, Evolution Moving Company DFW experts warn that you should be careful when furnishing rental properties and rely only on experts to ensure the furniture arrives undamaged. After all, you should protect your investment however you can.

Always get a thorough inspection

Relying on your intuition isn't enough, even when buying a home for yourself. When purchasing a rental property, you'll want to know about every possible issue a property might have. A property might seem like a deal, and you might feel pressured by a rush sale, but you should never rely solely on your experience with a property walkthrough. Get the opinion of a professional home inspector before making any decision to do with buying a property. It might not seem important, but home inspections are vital to evaluating and purchasing rental properties. Anything less than a full, roof-to-foundation inspection isn't enough.

Additionally, you should know the difference between an appraisal and a home inspection. Both are important in different situations, but you need a home inspection when looking into a potential rental property. Remember, you can never be too safe when investing, but be thorough.

House inspections are vital to making sure a property is worth buying.

Know the types of rental properties

A big help when looking into rental properties is understanding the different types of properties. There are five types of rentals: condos, vacation rentals, HOA properties, single-family homes, and multi-family unit properties. Each of these properties has its own advantages and disadvantages, and you should consider them carefully if you're buying your first rental property. And if you already have some rentals, it's generally a good idea to diversify your portfolio with different types of properties.

Additionally, if you're starting your career in investing in rental properties, you should consider some of the reasons to move to Houston. In Houston, you'll find an abundance of every type of rental property, which is only one reason Houston is a great area for investment. Starting your real estate career in the right place could be just the advantage you need, so be careful when deciding where to start.

Know how to determine your NOI

Anyone working with real estate knows what return on investment (ROI) is. NOI, however, is something that only people who deal in rental real estate need to worry about. NOI stands for Net Operating Income, and it allows you to predict your earnings from a property once it's purchased. As such, this is a vital tool whenever you want to expand. Knowing how to determine NOI lets you know if a property will be profitable before buying it. Additionally, determining your NOI can also help a lot with managing your current properties and deciding what to do with them in the long term.

All in all, understanding NOI properly is crucial for anyone interested in rental properties. Additionally, when it comes to real estate, you should know that as home equity increases, so does your wealth. Knowing the value of your real estate is invaluable.

Determining your NOI is invaluable to your long-term success.

A guide to evaluating and purchasing rental properties – closing thoughts

Buying rental properties involves more steps than traditional investing in real estate. However, these few steps are vital for your success as an entrepreneur dealing in rental property. At the end of the day, your goal as an entrepreneur should be to make the most profit out of your real estate, and rental properties are a little more complicated than regular real estate. So, always be thorough when considering a new rental property, and use everything you can to ensure that it will be profitable in the long run. We hope this guide to evaluating and purchasing rental properties helps you find some potential properties, and we wish you a great rest of your day.

If you are looking to invest in rental properties, let The Village Realty Group assist you through the process. Our service is free for Buyers. Call or text us today at 281-450-3623. You can also email the broker, Melissa Hill, at melissa@thevillagerealtygroup.com.

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