Choosing the rental properties that you want to invest in can be challenging for landlords. In the end, landlords want to invest in properties that will be lucrative and will not only help them make their money back off of the investments that they have made but also to help them turn a profit.

Hand-selecting properties carefully can be the difference between losing $10,000s doing renovations before someone can event rent the unit versus simply having to spruce up the place a bit before it’s “rent ready”.

So What Do I Look For When Deciding What Properties to Invest In?

Anyone looking to get into being a landlord needs to know what to look for in potential properties that they will invest in. This can be the difference between investing in rental properties that turn out to be nothing but “money pits” versus investing in those that are going to help the landlord make money instead.

The following are some great tips to help new landlords decide which properties are worth investing in versus things that should tell them to “STEER CLEAR” of the property:

  • Research The Area: Research the area to determine which types of homes are the most in demand at that time. This can help you determine which types of homes you want to invest in. This can be the difference between deciding to invest in townhomes versus condos or single-family units. Knowing what rents for the highest rates in that area will help you know what to focus on when you are purchasing properties to rent out.


  • Set Your Criteria: Set the criteria on the properties that you will be purchasing for rental units. For example, you may only want to rent homes that are a minimum number of square feet in size or you might want to only purchase properties with a certain number of bedrooms and bathrooms. Other options for minimal requirements might include things like appliances must be from a certain year onward or that the property must be more recently renovated.


  • Remember, It’s OK To Start Slow: Just because you want to invest in rental properties does not mean that you have to go out and buy 25 properties to start. It’s OK to start slow and build into it. There is a great article from the Washington Postthat even suggests buying a property a year is a great way to build up wealth in real estate over time. Take it at the speed you feel comfortable going at and can reasonably afford without spreading yourself too thin financially.


  • Consider the Area You Are Purchasing Property Near: Consider the parts of town you are purchasing property in and how easy they are to rent out. For example, you will get more money out a rental in a safe community than you will in a community or area that has a higher crime and violence rates. Properties next to other distractions or annoyances such as an airport or train tracks may also affect the desirability of the properties being purchased.


  • Have Each Property Inspected: The average home inspection will cost $300 to $500 per property. Yes, this may seem like a cumbersome expense to take on before you even purchase the property but it can save you a lot of unnecessary expenses later on. Inspections can reveal problems with the property that you otherwise wouldn’t have known about. Structural issues and safety issues are taken very seriously when someone is renting a property and you are protecting both yourself from legal action and your tenants from dangers to ensure that your properties are in good condition before purchasing and renting them out.


  • Understand Your Expenses When Choosing Rentals: This includes understanding the tax rates in the area. The amount of tax that you have to pay on your property will cut into your profits as a landlord. Some neighborhoods have different tax levels than others. Some cities, towns, and, counties that seem close in proximity have very different rates of taxes. Understanding this as you go in helps you calculate what you will pay before you take the leap and realize property taxes are too high. As a landlord, you pay these taxes, not the renter, so you are responsible for whatever those taxes may be!


  • Consider the “Livability” of the Area: Choosing a neighborhood that is desirable to more people will lead to more successes in renting out your properties. This includes ensuring that there are good schools in the area, that the crime rates are low, and that the area has amenities people want to use and will enjoy. This will all entice people to move to the area if it’s a quality neighborhood where people want to live.

The bottom line is that every area has great neighborhoods to live in and rental properties to purchase.

Finding the ones that people want to live in is the key to being a successful landlord. In the end, there are no guarantees, but ensuring that you are purchasing properties in an area where people want to live and can pay a good going rental rate will ensure that you are lucrative as possible in your future landlord endeavors.