Purchasing one real estate investment property is a great way to gain experience and start your journey into owning an investment property. Once you gain experience and have a positive cash flow, you can begin to look for additional properties. Successful portfolio growth is about knowing what characteristics of additional properties are the most desirable.
Keep these five things in mind when looking for your next rental property.
The number one rule of real estate is location. When you bought your first rental property, you focused on the ideal location to invest. Focus your search for a property by creating parameters that will attract your ideal type of tenant. This could be families, young professionals, or retirees.
While you want to think about that for your next properties, there are additional elements you should consider. Investing in properties that are close to each other can make it easier to manage them. You can drive by them to check on them easily. You can also negotiate volume discounts with contractors for servicing both properties.
2. Age and Condition
Some properties require more repairs and maintenance than others. A property that needs a lot of work shouldn’t automatically negate a particular property. However, the numbers need to make sense when accounting for the additional work. Newer homes may require fewer repairs, but the purchase price can be higher.
You also need to consider the age and condition of the home and the type of tenant that it will attract. Focus on investing in well-built homes that are in good condition. These properties tend to have lower maintenance requirements and attract long-term tenants.
Always check the numbers to make sure your investment makes sense. You could fall in love with a particular property, but if the numbers don’t make sense, you’ll have to pass on it. You should already have an understanding of the numbers from your first investment. Keep or adjust your financial strategy before you look at more rental properties.
Consider that you’ll now be managing more than one mortgage. You will also have additional operating costs and property taxes. Remember that just because you’re buying in a high-rent area doesn’t automatically mean you'll make more profit.
4. Appreciation Potential
While you are looking for properties to rent out, this isn’t the only way you can profit from your real estate investment. The other way is to hold the property long-term and then sell it when the overall value appreciates.
To benefit from this, you should invest in property that is in a developing, redeveloping, or up-and-coming area. These are houses that will become more in demand over time.
5. Typical or Standard
When turning your rental property investments into a steady income, you want to look for low-risk properties. These are the homes that are considered typical or normal. For example, a three-bedroom, two-bathroom house would fall into this category.
The more “normal” a house is, the easier it is going to be to rent out. The artfully restored Victorian house may be enchanting, but it isn’t the right property for this type of investing.
Focus on Property Growth
You’ve made the smart decision to invest in one rental property while you learn the ropes. Now that you are confident in your skills and processes, it could be the perfect time to expand your portfolio. Start your property search in a similar manner that you selected your first property.
Focus your search on the right location, check the house’s condition, check the numbers, and remember that this is an investment and not your future home.
Contact our team today and let our skilled property managers help you find the best properties for building your portfolio.