Owning a rental property is an asset that not everyone can afford. Asides from the capital and ongoing fees that properties like these require, owning one demand time and energy from the owner. They can also be a very profitable investment and provide a constant revenue stream if managed properly.
Keep in mind that your investing range will be limited by whether you intend to actively manage the rental property i.e be a landlord or hire someone else to manage it. If you intend to actively manage the property, you should not get a property that is far away from where you live. If you are going to get a property management company to look after it for you, your proximity to the property will be less of an issue.
Now let’s take a look at the top 5 features of a profitable rental property, in no particular order;
Location! Location! Location! A home in a good neighbourhood looks very attractive in the real estate market. Tenants are becoming more vigilant and tend to do their due diligence about the places they want to live. Everything from good schools to knowing that the neighbourhood is safe with low crime rate will definitely go a long way in keeping your property all the most attractive.
The quality of the neighbourhood in which you buy a rental property would ultimately determine the types of tenants you attract and how often you would face vacancies. For instance, if you buy a rental property in a neighbourhood near a university, the chances are you would have more students as your potential tenants and that you are more likely to face fairly regular vacancy periods.
No one wants to live next door to a hot spot for criminal activity. Make adequate findings of the crime rate in the area not just from the homeowner who is hoping to sell the house to you. You might also want to ask about the frequency of police presence as well as the neighbourhood watch in the area
Understanding the rental rate for the area that you are interested in helps make a better investment decision. Rental income is the profit of investing in a rental property, so you need to know what the average rent in the area is. If charging the average rent is not going to be enough to cover your expenses and sustain you, you have to keep searching.
Also, be sure to research the area well enough to gauge where the area will be headed in the next five years. If you can afford the area now, but major improvements are in store and property taxes are expected to increase, then what could be affordable now may mean bankruptcy later. Ultimately, the more rent you can receive, the better the purchase is
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Take a good look at the attraction of your potential investment. If your potential neighbourhood has current or projected basic public amenities, malls, gyms, cinemas and other social amenities, it can go a long way in attracting various renters.
If there are many new projects, luxury apartments, housing initiatives, business parks or malls going up in your area, it is probably a good growth area. However, watch out for new developments that could hurt the price of surrounding properties as additional housing could also provide competition for your renters, so be aware of that possibility.
Also keep in mind that Landlords with properties in thriving communities often have more pricing power due to supply and demand, especially if they own more desirable properties.
All in all, searching for a rental property with the above characteristics would provide you with a property that will increase in value over time. This is where a lot of investors build their wealth over time. Stay vigilant and do not miss the opportunity of making the best investment decision open to you.
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