How renewal can guide real estate investing.
Urban redevelopment can open new opportunities for single-family rental home investors. But could it also guide your investing strategy? As increasing numbers of entrepreneurs have entered the single-family rental home market, savvy investors are looking for new ways to expand their portfolios. Long popular with house flippers, starting or joining an urban redevelopment project could also have significant advantages for buy-and-hold single-family rental home investors.
Urban redevelopment or renewal is a process through which areas or neighborhoods in a city are improved for the purpose of attracting more stable, affluent residents. For investors and developers, one of the most exciting parts of urban redevelopment is the opportunity to have a real impact on troubled parts of town. By buying, preparing, and renting quality single-family properties, rental home investors can contribute significantly to the revitalization of a neighborhood and invite others to do the same.
But there are a few things to know before diving into an urban redevelopment project. For example, single-family rentals located in suburban areas are often in need of some repairs or improvements. According to urban housing experts, investors looking for urban properties should be prepared for houses in much worse shape than you would typically find in the suburbs. What this means for rental home investors is that urban properties may need a larger budget for the remodeling and repairs necessary to bring them up to a habitable condition. Once you have done so, however, your urban rental home could become a profitable source of rental income for many years to come.
Buying rental homes in urban areas can also come with some unique challenges. For example, if you are buying in an area where renewal has already begun, it can be difficult for your appraiser to get a true sense of the property value. This makes it critical to be proactive during the appraisal process, perhaps providing him or her with comparable property data or other information they will need. Another unique challenge of buying investment properties in urban areas involves the amount of attention that you will attract from city officials, nosy neighbors, and preservationists. If the property you want to buy is located in a historic district, that will add yet another layer of surveillance that may limit what you can do with the property. However, many investors have found success by creating amicable relationships with various oversight groups and individuals and reassuring them that their plans for the property include careful tenant management and property upkeep.
Finally, investing in urban neighborhoods gives rental property owners a chance to get creative with their rental strategy. Buying a property in an area in the midst of a renewal offers rental property owners a chance to consider not only what kind of tenant they are able to attract, but who their ideal tenant might be. As the area reinvigorates, there will be real opportunities to focus on a new renter demographic that might help further the project of renewal. If the location of your property has underrecognized benefits, like access to public transportation or proximity to a large school, employer, or the arts district, you can become one of the first to market your property to attract tenants interested in these features. In this way, you could significantly shape the composition of the neighborhood in which your property is located and encourage others to do the same.
Ultimately, the key to successfully investing in urban renewal areas is information, and lots of it. Armed with detailed market data and a clear vision for the future, single-family rental home investors can seize upon the opportunities that urban redevelopment brings and guide their investing to new heights, and the urban area does not need to be near you. With a nationwide professional property management organization like Real Property Management, you can live far from your investment yet secure in the knowledge that your property and tenants are being managed effectively.
To learn more about Real Property Management, visit realpropertymgt.com.