A rental property is an investment in your future, and around 36% of Americans agree!
It offers a way for you to generate income with little effort on your part. If you’re interested in learning about identifying the perfect rental property, we’ve put together this list of features that will help you identify a profitable property.
1. Attractive payout ratio
First, the payout ratio is the percentage of net income after all expenses have been paid. It’s an indication of how much money an investor makes. This figure must help you calculate how much money you can put into a property before it becomes profitable.
For example, if it takes $1000 in rent and $1000 in expenses to make a $1,000 profit, your net-profit-to-rent ratio would be 20%. However, if it took $1500 in expenses to make a $1000 profit, the net-profit-to-rent ratio would be only 14.3%. Although this might not seem like much of an increase, it can directly affect your bottom line.
This leads us to our next feature.
2. Low expenses
Low expenses are essential for two reasons. The first is because they show that a property is well-maintained and in good condition. This will hold for both the exterior and interior of the property.
If you have a poorly maintained or run-down property, you may not receive as much rent from it as you would otherwise expect. The second reason is that the lower the expenses, the more profit you’ll make and have left over to invest or spend.
3. High rental rate
For any property to be profitable, it needs a high rental rate per month. This is because you need to pay back your mortgage, property taxes, and other miscellaneous costs to keep your property profitable.
Unfortunately, rental rates are typically lower in bad neighborhoods than they are in good ones. Paying high prices for a low-rental rate property may not be an intelligent investment in the long run. That’s why you need to do some research on what rental rates look like in your area.
4. Low crime rate
To determine if the neighborhood you’re thinking about purchasing in is safe enough for your investment, look for indicators like surveillance cameras and lights that stay on at night. These are good signs that the neighborhood is thriving and not at risk of being run down by criminals or drug addicts.
Another good indicator of a low crime rate is recent renovations to the area, including new construction, updated buildings, and newly paved roads. A property in a low crime rate area ensures a higher demand at a much better rent.
Hire Rescomm Property Managers
More importantly, hiring a property manager ensures your property is well-managed and yields good returns.
If you’re looking for professional property management services in Orange County, then ResComm Property Management has you! We offer high-quality property maintenance and compliance services for both commercial and residential properties.
Contact us here to learn more.