3 Things to Look Out for When Buying a Rental Investment Property

We've all read the articles on how renting is overtaking the housing market, but at the same time there are still hordes of mistakes that investors make as they bid to climb onto the elusive rental ladder.

As the title of today's post might have already suggested, we are going to look at three golden rules that you need to take into account when looking for your next rental investment. Abide by these and the chances of you becoming one of the many investors who are enjoying the fruits of the rental market will skyrocket.

The condition of the property

It goes without saying that you need to know what you are letting yourself in for as soon as you part with your cash for one of these properties. Some people will be looking to make big profits with a fixer-upper, but if you don't fall into this category it stands to reason that the condition of the property needs to be at least respectable so it can go straight onto the rental market.

You might be able to purchase a home warranty for rental, which can help your cause immensely. In simple terms, this will give you some protection in case certain elements of the property falter in the coming years. In terms of the here and now though, you need to make sure that there are no issues to fix before someone moves in - or if they are, they at least need to be minor.

It's all about percentages (or 1%, to be precise)

Admittedly, this next point is going to vary a little depending on where in the world you are looking to buy your rental property. However, most investors stick to something going by the name of the 1% rule. This refers to the amount of returns you are going to reap from the property. For example, if you paid $200,000 for it, you would be looking to recoup around $2,000 per month in rent.

There can be times where you can deviate slightly from this rule. For example, if you know that the property is in a so-called "up and coming" area, where the rents might continuously increase, you can build this into your calculations.

Location, location, location

It's one of the most overused phrases in the real estate industry, but unfortunately it's very true. The neighborhood the potential property is based in is going to be absolutely paramount to your success.

If you buy a property in an area which is riddled by crime, all sorts of problems are likely to be brought to your doorstep. There's a chance your property will be directly affected through the likes of burglaries and vandalism, while at the same time rents are unlikely to increase.

At the same time, buy a rental property with excellent school links and you'll be amazed at what people will be willing to pay. Universities can be another good choice, although if you do go down this route you should consider all of the implications that come with renting to students.