Buying a Rental Property? These 4 Key Tips Will Ensure You Buy One That Turns a Profit

Buying a Rental Property? These 4 Key Tips Will Ensure You Buy One That Turns a Profit

Are you starting to grow bored of watching your money go nowhere sitting in a bank account? With today's interest rates doing little to encourage saving, many individuals are looking elsewhere for new investment opportunities. Here are four essential tips for buying a profitable rental property for you!

1. Buy A Property With Year-Round Potential 🏠🔁

Many real estate investors agree that the best rental properties are those that generate income every day of the year. The most straightforward situation to manage is one where you have stable, long-term tenants in place that aren't going to move or change often. Browse local property listings around schools, colleges and large employers to see if there are any suitable homes for sale. 

Once you gain experience and invest in other properties, consider branching out into vacation or short-term stay homes. But to get started, aim for stability.

2. Predict Your Income And Expenses 📋💰

Next, you will want to craft a budget. Have a look through rental listings in your target communities to see what renters are currently paying. This will give you some idea of your potential rental income for a similar-sized home. You can then compare this to your estimated monthly mortgage payment, taxes, utility costs and repairs. It is impossible to predict precisely how much you will need, but this exercise can quickly prove whether this area is likely to be profitable.

3. Treat Your Rental Properties Like A Business 💼

Since you have already taken the first steps with a budget, you might as well continue down the path to a full business structure. Most real estate investors set their portfolio up in an incorporated or limited-liability company, which reduces personal exposure. It can also be an efficient way to manage any legal issues that arise as your investments grow. Also, there will be significant tax advantages, including being able to write-off expenses such as repairs, contractor work and renovations.

4. Work With Experienced Professionals 👩‍💼👨‍💼

Speaking of contractors, it's worth reminding to only work with experienced professionals who are licensed, certified and have references. Paying for quality work up-front ensures that you won't have to deal with hefty repair bills due to shoddy workmanship. 

Ready to buy a rental property? Check out my Essential Down Payment Assistance Guide to get started!