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Buying Rental Properties - What to Look For

By - 2008

Buying rental properties is a great way to build your wealth, but how do you find a good deal? Watch for the following things.

1. Good location. Traffic is good, because it makes rentals easier to rent. Signs can pull more response than an ad in the paper. Also, if it's in a nice locale, it will usually rent faster. Nice locales include places that are close to amenities.

2. Good numbers. Verify every last expense, figured them into your calculations, and be sure that you'll have positive cash flow from the start. One of the biggest mistakes investors make is to start with negative cash flow.

3. Expensive homes. High home prices create rental demand. What do people do if they can't afford to buy? They rent, of course. Look in areas with high house prices.

4. Low maintenance properties. Cedar-shake roofs and wood-sided buildings just mean more expense and trouble. Look past current expenses to how much maintenance the building will need. Lower maintenance means fewer headaches and more profits.

5. A good rental history. Look at the rental history, and note how long residents are staying on average, and how often they pay on time.

6. Below-market rents. Buying rental properties with below-market rents is a sure wealth builder. It means you get to raise rents, and that means you immediately raise the value, because rental property values are based on income.

7. Complies with fire codes and zoning. Have the property inspected, and ask local officials if there are any existing problems. Sometimes a violation that was tolerated for years won't be tolerated once a new owner is in the picture.

8. Less than 25 years old. The number is somewhat arbitrary, but if you limit your search to newer buildings, you'll be less likely to have building code and maintenance problems.

9.Owner/manager is out of state. These properties are often the best deals. It can be a real headache to manage a property from far away. Out-of-state sellers are often more concerned with a quick sale than a high price.

10. Stable or improving neighborhood. It's okay if it's stable, but if you can buy in a neighborhood that is improving, you'll rent the units more easily. This less vacancy, more income, and therefore, automatic appreciation in value with time.

As you look at properties, you'll find other things to add to this list.Some things are particular to an area, like local rental codes that tell you what you have to fix or improve. Add these to the list above, and actually carry the list with you, so you don't forget anything. Watch for the right things, and you'll be safer and make more money buying rental properties.

Related Articles:

Buying Rental Property - Avoiding Seller's Dirty Tricks

Real Estate Appraisal For Rental Properties

Rental Properties - Ten Ways To Increase Income

Investment Properties - Ten Ways To Find Them


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