There are many different strategies investors take when buying a rental property. One thing that is true is that the more properties you buy, the better you get at achieving bigger returns. Buying a rental property can be an exciting and scary undertaking for some people. Obviously there are many things to consider before you take the plunge on a property and submit an offer. Here is a breakdown of what I consider the most important items to consider for success.
Location, location, location
This cannot be overstated. This is at the top of the list for renters and it should be for you as well. You should be taking stock of all the upsides in the neighbourhood you are interested in buying in. Shops, transit, restaurants and quality of the neighbourhood are extremely important. You should be asking yourself, if you had to sell tomorrow would it be a problem? Don't buy that property if you think it would. If you buy in a good neighbourhood with buyer demand you will have no problem regardless of the state of the market. In addition, a property in a quality neighbourhood will always outperform others locations when it comes to long term returns.
Fixer uppers are gold
If you think that you have it in you then look for poorly maintained properties with below market rents. These are diamonds in the rough!! It takes time to update the units and raise rents, but these types of properties have the biggest upside hands down. They are hard to find and you will face stiff competition from other buyers.
You should always be thinking about how rentable the units are a when you are looking at a prospective property. Units with a great layout, good sized rooms and laundry are some of the key things that tenants look for. Like home buyers, tenants look for the negatives of a building and unit. The more negatives they observe means they are more likely to pass on the unit.
Sealing the deal
So you have found the perfect rental property to buy. Now it's all about the execution. Real estate investors need to be disciplined when deciding how much you are willing to pay. Do your homework and crunch your numbers. The numbers don't lie. If your cash flow does not support the purchase price and you overpay for a property, then you are off to a bad start!