Maybe you’ve been thinking about buying a rental property for a while now but something has been holding you back. The process is simple enough, right? You find a house you like, buy it, and rent it out… Well, in theory, yes, but you know that there is much more to it than that.

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You don’t know exactly all the logistics, but at the bare minimum, you know you want a smooth borrowing experience, if nothing else. If you think there’s a lot to buying a home for yourself, just imagine the pressure you’re under in trying to purchase a property that you’re hoping someone else will like.

Now, some people will enter the real estate investing market completely blinded to the intricate details all investors should be aware of, and completely blow all their money on a property that turns out to be a money pit. You had those feelings to not invest just yet for a reason, and it’s because you don’t want to invest when you don’t know what you should invest in or how you should do it… and that’s a smart move.

Yes, investing is about taking risks, but there is a fine line between being a risk-taker and being stupid with your money. Making sure you’re well-versed in real estate investing is the best thing to do, and if you’re unsure about how to go about it, consider starting with learning about the features and considerations that make a rental property profitable.

What Makes a Rental Property Profitable?

The Neighborhood

Ideally, you want to purchase a property in what’s considered as a good neighborhood. There are signs and characteristics of a good neighborhood, and it’s those things that will determine the types of residents you will attract and your rate of vacancy as well. So be sure to drive around the various neighborhoods to see what would attract high-quality tenants. Things like tree-lined sidewalks, walkability, and caliber of people will all help you determine if buying in a particular neighborhood will be a lucrative investment.

Crime Rate

No one is going to want to live in a home that is riddled with suspicious activity, so it’s important you do your due diligence to check out the crime rate in the area you’re considering buying in. 

According to US Politics and Policy, burglars actually have a decision-making process and usually target neighborhoods that are of a greater ethnic background because the risk of getting caught is much lower.

To ensure the safety of your future tenants, and your property, consider having pathway lights installed and a security system installed. You can actually make having a security service a requirement for each tenant you have.

School District

If you’re looking to purchase a family-sized home, then you definitely want to make sure you look at the school district as well. People with children are going to want a home that’s not too far from their children’s school, and even within walking distance from the school. The higher the quality of schools near your property, the more interest you’ll get from potential tenants.

Recreational Amenities

In order for your property to profit, it also needs to be in an area that’s feasibly close to recreational activities like parks, shopping, dining, and other forms of entertainment. This is an important consideration to think about whether it’s a family with children or not. 

You have to understand that liking where you live isn’t just about the house; it’s the whole area in general. If you can find a home in a great area, people will flock to your listing, giving you the ability to set a decent rent asking price.

Likelihood of Natural Disasters

If you live in the same area as your rental property, you’ll have a pretty good idea of the type of weather the area receives but you also have to hone in on the property to determine if it’s an area prone to flooding or disasters that put your property and tenants in danger. This potential risk is why you also have to factor in insurance from your returns

Number of Vacancies in the Area

Looking at the neighborhood you’ve chosen, are there a lot of vacant homes there? If there are, it could be a sign that the neighborhood is declining but it’s up to you to figure out why there are so many listings in the neighborhood.