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Over the last few weeks I have stepped up my search for my first rental property. What started as sort of a passive search (oh, if a good deal falls in my lap I may look into it) has now become a daily routine of checking real estate websites and multiple listings.
I’m officially ready to become a real estate investor.
During this process I have discovered a number properties that at first glance look appealing, but after closer inspection don’t quite fit my overall strategy. I have an overall strategy?
The Ideal Rental Property (for me)
It makes sense before jumping into the real estate investor game to develop some sort of strategy with respect to the type of property you are looking to buy, it’s location, price range, age, size, rental opportunity, etc.
Without that, you will soon be overwhelmed by the options out there and become paralyzed (where I’ve been for much of the last year since I decided I’d like to start buying properties).
It seems that the sweet spot for an ideal rental property may be a 3-bedroom, 2-bathroom home on a small to medium sized lot.
These homes are best suited for young families and single parents – two groups that traditionally look to rent before buying a home.
Square footage is not particularly important to me, but the size of the lot is.
I don’t want a small home on 3/4 of an acre. That’s a lot of maintenance for me (when the home isn’t rented) and the renter. What renter wants to mow 0.75 acres of grass? I wouldn’t.
What is that old saying about real estate? Location, location, location. It is particularly true when considering a rental property. It helps to identify and know your target rental market.
I have already mentioned my primary target market is young, small families and single-parent families. For this reason, it is important to consider the school zones in which I purchase properties.
Naturally, this probably means I will pay a bit more for property as opposed to those located in a poor school zone.
That’s OK; if it means the difference in keeping the property rented or not I’ll take the risk.
If I were attempting to rent to college students, proximity to a local university and/or nightlife hot-spots may be more attractive than good elementary schools or major employers.
Age of the Property
I grew up in an old house, so I’m not afraid of owning one myself. However, I’m not sure I want to put renters in a very old house.
If it were my primary residence, I’d be able to watch it more closely for signs of needed repairs, and could make many of them myself.
However, with a rental, there may be long periods of time where I’m not required to enter the home and I’d miss some of those signs.
For the most part, I’m looking for homes built in the last 15 years (late 1990s to last few years). Some of these homes may need a new roof in the next decade, and may be in need of minor upgrades, but most appliances and designs should be relatively modern enough to rent without major upgrades.
Finding Rental Properties
Knowing what you want to look for and finding them are two very different challenges.
I’ve discovered that knowing what I want is the easy part. Now I’m off to find a real property, and finding that I really should call in the experts.
I plan to contact a real estate agent soon and let them know my intentions, my search parameters (location, age, size, etc.) and ask for their assistance in locating a suitable property.
I’d love to find a great foreclosure or short sale to save some money at the buy, but I’m not opposed to a more traditional transaction if this price is right.
Long term, I’d also like to find an agent at a real estate company that can also serve as a good property manager, because I don’t think I’m up for being a landlord.