Tips for Buying Profitable Rental Properties and Growing Your Real Estate Investment Portfolio
A landlord's guide for creating more passive income by purchasing the best rental properties in the right locations.
Looking for tips on buying profitable rental properties? Investing in real estate and buying rental properties as an investment is an excellent way to create passive income if you do your homework first. In this Landlord’s Rental Guide article, we offer some helpful advice and tips to buy profitable rental properties in North Carolina, and other real estate markets, to grow your real estate portfolio.
First, we will take a look at how to choose the right market to invest your hard-earned dollars. Second, we will share tips on how to choose the right rental home to purchase. If you have any further questions about buying profit-generating rental properties in Raleigh, Durham, and Chapel Hill, please do not hesitate to contact us at Red Door Company.
Local Job Market and Rental Market
To fill your vacancies and generate rental income, landlords will need to own rental units in locations where there are plenty of available tenants who can afford to pay rent. Locations with growing employment opportunities tend to attract more people moving to the area which translates to an excellent local rental market for real estate investors. According to Forbes “2016 Fastest Growing-Places,” owning rental properties in Raleigh, NC is a smart move for landlords because the local job market is promising and its median annual pay for college-educated workers is also ranked highly.
Research Average Rent in Area
Landlords cannot own profitable rental properties if the rent amount is not enough to cover the rental unit’s mortgage payment, insurance, taxes and other expenses. On the other hand, landlords cannot charge any rental rate they wish because overpricing will lead to vacant rental properties and zero income. Before adding a rental home to your real estate investment portfolio, research the local area to see what the average rent is and whether or not those average rents are trending upwards.
Rental Property Listings and Vacancies in Neighborhood
Does the neighborhood surrounding the North Carolina rental property you are thinking of purchasing have an unusually high number or rental listings? A large number of vacant properties listed for rent at one time is not a good sign. Neighborhoods with a low number of active listings and rental units that don’t stay on the rental market long are signs of a healthy, desirable neighborhood. In other words, a neighborhood where you probably want to own rental properties.
Rental History of Rental Property
When investing in rental properties, remember that cash flow is king. After you follow the tip above and research average rents in the area, don’t forget to do your homework on the particular property you are thinking of buying. Ask about its rental history and the average time it takes to fill a vacancy in between tenants. Ask to review profit and loss statements for the past three years and check the rental property’s expenses over the previous 12 months. Do your due diligence on each property you plan to buy, and the chances of owning a profitable, cash-flowing rental property will improve significantly.
Hire a Professional Property Inspector
Successful landlords understand that property maintenance and unexpected repairs are part of doing business as a rental real estate investor. While landlords can’t predict unexpected expenses such as when a water heater or HVAC unit goes bad, they can hire a professional property inspector to provide a report on the overall condition of the rental unit. After reviewing the inspector’s report, a landlord will have a clear picture of what expenses may crop up or what repairs will need to be performed to get a home ready to rent.
Don’t Forget About Property Taxes
The last tip for buying profitable rental properties is to figure out how much you will pay in property taxes. If the property you are buying is an owner-occupied property, landlords must remember that their annual property taxes will be higher once it is not owner-occupied. If you forget to account for this difference, then your profitable rental home could become a rental property that drains you financially year after year.
Have any further questions about buying profitable rental properties in North Carolina or other states? Would you like to learn more about the property management services we provide landlords with rental real estate in Raleigh, Chapel Hill, and Durham? Contact us today and let’s talk!