As rents and home prices continue to rise, many investors are turning to rental real estate investing. Holding a property, generally for four to six years, and renting it in the meantime is a simple way to earn passive monthly income and build your net worth. Whether you make a career of being a landlord or simply invest in buy and hold real estate as a side business, the opportunities for exceptional ROI are abundant across California.
After securing your rental real estate funding, the next most important decision in your rental real estate investment process is choosing the right house. Here are a number of key factors you should consider while looking for a rental property.
Location, location, location: Think about buying a rental property the same way you would think about buying a fix and flip property. You want to look in areas where the population is growing, where new businesses are popping up, and where the neighborhoods are safe. Figure out what income bracket you’re going to be able to appeal to, and put yourself in the mindset of your potential future tenants. If you want to attract young families, look for neighborhoods with great schools and nice parks. If you live in a college town and expect your renters to be students, think about amenities that matter to young adults, like separate bathrooms and proximity to public transit.
Taxes: Crossing the boundary from one city to the next could have a huge effect on the property taxes you’ll wind up paying. Think about the local tax burdens and benefits you’ll be subject to in different areas, and be sure to include those costs in your investment calculations.
Long term appeal: The ideal situation for a buy and hold investor is securing a property, immediately renting it to a reliable tenant, and having that tenant stick around until you’re ready to resell the property, perhaps to that very tenant. When choosing a rental property, it makes sense to look for a home or apartment building that is suited to long-term tenants. The less tenant turnover you have, the lower your costs will be. Look for homes that are comfortable, that you can rent for a great rate, and that you expect stable people to be interested in.