Ten Factors to Consider When Evaluating the Profitability of a Rental Property

Are you looking to add a rental property to your investment portfolio or are you just starting out?

An experienced investor knows the importance of doing their due diligence before investing in a rental property to ensure that it truly is a sound investment. A property's profit-making potential can be assessed by several different measurements.?

Use the following characteristics to measure the profitability of your chosen rental property:

1. Neighborhood and Location

A property's location is always critical. Location will play a major role in determining the type of tenants you will attract to your rental property. If you buy near a school, for example, students are likely to be your potential tenants, and you may have trouble filling vacancies during school break.?

2. Safety

Nobody wants to live near a crime hotspot. Examine the rates of serious, and minor crimes. Check the local crime statistics. Inquire about the frequency of police presence in the area.

3. Nearby Schools?

While your primary concern will be your rental property's monthly cash flow, the overall property value will be important when you sell it. If there are no good schools nearby, your investment may lose value. Property near high-quality school systems will also help attract families willing to pay higher rental rates.

4. Available Amenities

Tenants are always trying to strike a balance between rental costs, and quality of life. Look for malls, parks, restaurants, gyms, movie theatres, public transportation, and other rental-friendly amenities.?

5. Employment Opportunities?

Active job markets help build strong rental demand by attracting larger groups of tenants. This could result in higher rental rates and lower vacancy rates.?

6. Vacancy Rate

A high number of listings in a neighbourhood could indicate a seasonal cycle or a declining neighbourhood. High vacancy rates force landlords to lower rents to attract tenants.?

7. Development Opportunities

The local planning department has information on the existing developments in the area. It's most likely a good growth area if there's a lot of construction going on. New developments may affect the values of nearby properties. Note that new housing could also compete with your property.

8. Average Monthly Rent

Rental income is the lifeblood of your business, so you need to know the average rent in the area. Be sure the rent is sufficient to cover the mortgage, taxes, and other expenses. Study and predict where it will be in five years. A low-cost property today may lead to bankruptcy later if taxes are expected to rise in the future.

9. Property Taxation

Property taxes differ significantly across your target area. Property taxes can be high even in unattractive locations in a great neighbourhood where long-term tenants live. Check if property taxes will increase in the near future. You can find out your property tax rate by contacting the local assessor’s office.

10. Natural Catastrophes

If the property is in a flood or earthquake-prone area, your insurance premiums can eat up your rental income.

Does this seem daunting and overwhelming?

Choosing the right investment property necessitates research. Gather information from as many sources as possible.?

Furthermore, it is prudent to seek advice from seasoned investors and other industry experts.

At Get RARE Properties , we will support you on your property buying journey by helping you avoid common mistakes and giving you an insight into the property market even outside the suburbs you are familiar with.

We select properties based on strict criteria and inspect several properties to ensure that the one you choose is the best fit for your needs. We can also represent you in negotiations with real estate agents, ensuring that you get the best deal possible.

Next steps:?Should you want to discover what we do and how rewarding it can be for you, feel free to touch.?Get RARE Properties ?comes to your assistance as an independent buyers' agent here to guide you through the complexities of purchasing properties. With us in your team, you can ensure that you will get the Right Personalised Strategy, the Right Property at the Right Place. As an experienced property investor and negotiator, we look at the property as a business transaction and do not let emotions creep in. We will help you choose the best deal at the right negotiated price and save you from undue stress making the process very pleasing and rewarding.

Get in touch via email at?[email protected] ?or book an appointment here:?www.getrare.com.au/ready

Disclaimer: This article is general and does not take into account your situation. It would be best if you considered whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.