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Tips to Help You as You Look for a Rental Property Investment

25 March 2020

Cody Day

Real estate provides a great means to invest in, as it has a great deal of benefits from short-term to long-term. A real estate investment can provide you with cash flow, tax breaks, and capital gains while you are the owner and after you sell.

Here are some recommendations to help you in your search for a rental property investment to purchase.

Preview Plenty of Properties

At the start of your search for a rental property, it is smart to understand you will need to look through a great deal of properties before you will find one that will make a great rental investment. Searching for a property with good rent potential and positive cash flow is a numbers game and requires patience and time. Talk to your real estate agent about what type of property you are looking for, and they can help you by selecting those that fit within your criteria of a good rental property. 

You may not even visit a property until you have run some of the expenses and other figures that pertain to a property to establish it has a quality rental potential. But be careful you qualify a property by analyzing it for cash flow before you take the time and visit the property. If you were to visit every property, for example, even if it didn't work out with a positive cash flow, you would be wasting a great deal of your time.

Compare Property Price With Rent

It is important to also analyze a property for its cash flow potential as a rental home. To do this you need to figure out some rent rates in your area and know what rent you can charge for any type and size of property. For example, you will need to know the rent you could charge on a three bedroom two bathroom home compared to a five bedroom two bathroom home. And you should also find out how much each property might have a different rent amount in different neighborhoods.

You will also need to understand how much a property's debt service would be if you purchase it, which is how much the mortgage payment and private mortgage insurance are. These expenses compared with the property's maintenance costs, property insurance and taxes, and other management costs and in addition to the debt service should be less than what you can collect in rent. 

To learn more about the current market, talk to a real estate agent in your area.

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