What Makes a Good Rental Property?



What makes a good or great rental property is a personal decision. It depends on the types of tenants you want to deal with. The vacancy rate you’re willing to deal with (which can include vandalism and other property crimes). The amount of profit you want to earn on your investment. And a host of other questions or issues that you need to be knowledgeable about before making a long term investment.

Where to Find Neighborhood Information

As an investor, you’re best off doing your own research of neighborhoods before investing. The type of information you want to learn includes:

  • Property taxes – from your local tax assessment office.
  • School quality – state and local superintendent of schools
  • Crime – local police departments
  • Employment – U.S. Bureau of Labor Statistics
  • Amenities – visit the neighborhood and take notice of parks, malls, gyms, movie theaters, public transport hubs, and all the other amenities.
  • Future developments and building permits – municipal planning department.
  • Real estate listings and vacancies – local real estate and property management companies.
  • Rents – property management companies, advertisements, door-to-door survey.

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One very good source of information is visiting neighborhoods during evening hours and on weekends when people are home from work. Talk to people working in their yards and walking dogs. Try to find renters in the neighborhood. Renters are more likely to give you the most realistic opinion of the neighborhood because they don’t have a financial investment. Once you have a significant interest in a specific neighborhood, visit it on different days of the week and different times of the day to gain real knowledge of what goes on at different times.

Understanding Income Levels

In my personal opinion, I favor rentals in urban settings that have a dense population of working class people. Neighborhoods with a mix of rental properties and homeowners. These are often a short distance from inner city war zones where gangsters rule instead of the police, vandalism is high, and the unemployed can’t make the rent payment. Don’t get me wrong, I certainly don’t recommend investing in these war zones. However, adjacent or a short distant from them is where you often find neighborhoods that are a mix of rentals and homeowners where blue collar workers take care of homes and work with police to keep the crime level down.

Of course, income levels across the U.S. vary significantly from region to region and state to state but the most recent Census Bureau numbers show the national medium income at $51,324. Other statistics show that households earning above the income medium have a home ownership rate of 79.5% and those earning below the medium income have a home ownership rate of 49.8%. What this implies is that neighborhoods with average incomes slightly below the national average are going to be a good mix of rentals and homeowners.

Finding the Right Mix

Each city has good cities and towns. Each city and town has good neighborhoods. And many neighborhoods have good rental properties. The secret to a good rental investment is doing the research to make all three characteristics line up. Successful real estate investing doesn’t start with buying just any old property that is currently available. It begins with deep research to find the best rental neighborhood you can and then finding or waiting for the best property to come on the market.

Brian KlineAuthor bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

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