A good friend has recently approached me and told met that they’ve been toying around with the idea of purchasing another rental property here in southern Oregon. He came up with a great list of questions that any real estate investor should consider when purchasing property. These are the variables that crossed his mind.
1) What should you consider when it comes to supply and demand of renters?
When thinking about where to buy you have to consider the type of renters you will attract. It’s best to drive around the neighborhoods you are willing to buy in. Near the college you may have to deal with high turnover, careless tenants, but you may be able to charge more rent. Low to mid range houses not only fall into the price range of a profitable rental property they also are in high demand. At this point in time where I’m living it is not hard to find renters. This may be in part because of the housing collapse and the increase in the number of renters. This means rent rates have been climbing which is good news for landlords. I personally prefer to buy properties on the same side of town that i live in. This may not be as big of a deal if you use property management but convenience should play a role in your decision making process.
2) Is purchasing inside of city limits better than in the county?
This one definitely has its pros and cons. Tax rates are significantly cheaper in the county vs. in the city. but with rural rentals usually comes property to take care of and well and sewer systems to maintain. I’ve always stayed away from rural properties because of these additional maintenance concerns. I think, in general, a 3 br 2ba small (1100-1600 square foot) single family home on a small lot is the best bang for your buck.
3) Does purchasing a home as a primary residence and then turning it into a rental then buying another home to live in have advantages?
Purchasing a home as a primary residence and living there for a time before turning it into a rental can have benefits if banks are giving an incentive for home buyers. I know that if you’re a first time home buyer there can be nice incentives. It’s best to talk to a mortgage lender about what kind of loans are available for your particular situation.
4) What websites are best for home searches?
I’ve always got in contact with a Realtor and they would give me access to the MLS (multiple listing service) through their portal. Many of them let you refine your search and send you listings that meet your specified criteria right into your emails inbox.
5) Should we stay away from short-sales and foreclosures?
Absolutely not! foreclosures and short-sales can represent huge savings if the banks are ready to liquidate the properties. Banks aren’t in the real estate business so they often don’t handle things as smoothly as I would like. There response time can be extremely slow and in some cases they may not respond to your offer at all. But be diligent this is where the best deals usually lie.
6) What qualities do renters look for in a home?
Most renters are interested in the same things anyone else would be. The school system is often an important one for many of us who have children at home and want their kids to go to the best schools possible. So doing a little research into the neighborhoods that go to those schools is a great idea. Conveniences is another big factor for people, is the home convenient to shopping and their place of work. Other things to consider are cleanliness, energy efficiency, enough space with a decent floor plan.
For more information about things to consider prior to purchasing a rental property see my blog “In Life, There Are no Mistakes, Only Lessons” Part I. Buying Property
Good luck in all of your real estate ventures!