So, you want to buy a house to rent out. It’s important to look at a variety of factors as you make your decision. Picking a house and community you want to live in is very different from choosing a house for someone else to live in. While many people focus solely on the home itself, the most successful investors consider the type of person who would want to live in that neighborhood. They look for homes that will give their renters a certain quality of life. They look for fix and flip or fix and rent opportunities that consider all of the following issues.
Consider HOA Restrictions
While most HOA’s will allow any qualified renters, sometimes they require additional checks and/or interviews to approve people for a neighborhood. Unfortunately, some of these added checks have created areas with a lack of diversity and in some cases have led to exclusion from renting in that community based on race. While many HOA’s are becoming aware of this issue, it’s important that you don’t let race become the reason you don’t choose a renter. Some companies are starting to lead in this area, like Nextdoor racism-prevention efforts have started to work on. They recognized how racial profiling was keeping some people out of neighborhoods and made efforts to fix it.
Is it in a location that people would want to live in? Let’s face it, when you want to entice a renter, you want to be sure it’s in an appealing spot. Renting out a property in a desirable neighborhood with beautiful things around it helps possible renters say yes. Additionally, when you’re looking at short-term/nightly rental options, an appealing location where people would normally travel to for vacation is also a good investment. Just because you find a good deal on a property doesn’t really mean it’s a good deal if no one would ever move there.
What’s nearby? Are there amusement parks, beaches, or other entertainment venues? Is it near hiking, biking, and other scenic views? Your rental property should be near things that someone would enjoy experiencing. This is especially true for short-term rentals. When people are planning a vacation, they want to go somewhere with different things to spend their time doing.
What does the house itself offer? Is there a hot tub, pool, or firepit with outdoor spaces to eat and enjoy? Are there multiple bedrooms with different sleeping arrangements available? Maybe there is a large TV and access to Netflix and other online entertainment. Maybe you’ve made an in-home movie theater and added a popcorn popper to the large kitchen. Is it a smart home? Does the home feel chaotic, or did you create a relaxing environment? Additionally, is the backyard fenced and private or is it open? These are just some of the home amenities to consider as you think about the kind of property to buy.
Rate of Turnover
If you want a long-term rental property, you’ll want to find a location where there is likely to be a good amount of turnover each year. This means that there are always new people coming and going who would be qualified to rent your home for a 12-month lease or more. In areas near colleges, universities, and military bases, you’ll be more likely to find the most possible renters as compared to a small town too far from employers and amenities. The turnover rate should be due to relocations or college students graduating and not because crime rates have skyrocketed in the area.
These are important. You’ll want to not only look at the overall rate but the types of crimes as well. Some areas have domestic disputes and not very many crimes from outside the home. Other areas are prone to petty theft and vandalism, while still others might have an issue with burglary and more violent crimes. Because of this, it’s important to look at not only the rates, but where the crime is coming from, how recently it happened, and if the issues have been resolved in recent months.
There was a neighborhood one time where all anyone could talk about was how dangerous it was because there had been a murder. It kept a lot of people from moving there because they felt like they were in danger. It turns out the murder was a domestic dispute and the criminal had been arrested, tried, and found guilty. While it was a violent crime, no one else had ever been in danger from it. But the crime colored people’s perception because they never fully looked into the situation.