Thinking of investing in rental properties? Here is some advice for you!
1. School Quality
The quality of schools zoned to the property was the primary deciding factor for over 85 percent of great tenants we interviewed. Schools are extremely important to families and single parents with school-aged children, and those tenants use this factor as an acid test.
To these prospective tenants, if schools aren’t good, it’s as if your rental property didn’t exist. Furthermore, school quality is the best predictor of neighborhood quality—something ALL great tenants seek (even those without children). Therefore, to ensure your success, only purchase properties zoned to high-performing, desirable schools.
Safety is our most basic human need and a powerful motivator for excellent tenants. One of the main reasons why your prospective tenant decided to spend more to lease a home (as opposed to an apartment) is to provide a safe environment for themselves and their family. Therefore, research crime statistics and only purchase properties in safe neighborhoods.
3. Move-In Ready Condition
The condition of the property—and more specifically the ability to move right in—is very important to excellent tenants. You can rent out a property that’s not quite move-in ready (requires paint, flooring, cleaning, etc.), but I assure you it won’t be to an excellent tenant.
Your target tenant plans to take care of your property and has high standards of cleanliness and maintenance. If you provide a move-in ready home, you are communicating that you share those same standards.
4. Proximity to Employment
Let’s face it, no one likes to commute! So proximity to employment centers is very important to great tenants. You can have a great, move-in ready home zoned to great schools, but it won’t matter if your tenant has to drive an hour to work each day.
As you look at potential properties, think about where your target tenants are likely to work and how close the property is to that area.
Most inexperienced investors subscribe to the myth that their investment properties just need to be “good enough for a rental.” Therefore, they purchase starter homes with cheap finishes and rent them to mediocre tenants for mediocre results.
Don’t do that; instead, purchase homes that have strategic upgrades that move the needle with excellent tenants: hardwood flooring, granite counters, stainless appliances, covered patios, etc.
6. Appliances Included
At the very beginning, your tenant incurs a large expense when leasing your property. They have to pay a month’s rent for the security deposit plus the first month’s rent. If your property does not include a refrigerator and a washer/dryer, the tenant would then have to purchase those items, increasing their upfront cost.
Remove the friction to make their decision easier by providing those appliances on the front end. Often your tenants won’t mind paying a little more for a property that includes all appliances.
7. Neighborhood Quality
Neighborhood quality determines lifestyle quality. Think about the community you live in—didn’t the neighborhood amenities play a major part in your decision to live there? Wouldn’t your lifestyle be different in a neighborhood with running and bike trails, lakes, community pools, tennis courts, a gym, etc.?
Quality tenants care about neighborhood quality. A community doesn’t have to have ALL those amenities, but the more the better.
8. Access to Transport and Basics
Access to modes of transportation and basic necessities like grocery stores, restaurants, and shopping is very important because it affects other important factors, such as commute to work and lifestyle quality. When you’re looking at investment properties think about: how easy is it to get to the main highway/park and ride/public transportation? Are there basic services within easy reach?
Here’s one thing investors and their tenants have in common: They both don’t like hassle. The main factor that determines how much hassle either will experience is the age of the property.
If you purchase older properties, they will have older systems (plumbing, electrical, HVAC) that break often, inconveniencing both you and your tenant. Purchase newer properties instead. A good rule of thumb is no older than 15 years, less than 10 if you can.
10. Rent and Price
Last but not least, your investment is ultimately a business decision for you, as well as your prospective tenant. Your tenant will be concerned with the rent, and you will be concerned with the relationship between the rent and the price you pay for the property.
Make sure the projected rent isn’t so high that it limits your tenant pool—or so low that it lowers the quality.