When you’re buying a home that you’re going to live in, you look for certain things that are important to you as a homeowner. On the other hand, if you’re buying a home, duplex, or apartment as an investment, there are other things that come into play that are more important. Here are some things that you should look for when choosing investment rental properties to buy.
The Location Is Still Important
The old saying, location, location and again location, is still a valuable way to look at a rental investment. However, you have to put yourself in the shoes of a renter and pick the location based on what they would want, and pay extra for. If you have multiple bedrooms, then you’ll probably get a family with kids as renters, they’re going to want a safe school with strong educational ratings. Check into mass transit, local job markets and other factors that will bring in more top quality renters.
Then, you’ll need to find out what the local market price of houses of similar size, bedrooms, bathrooms, and condition are so that you have a solid idea of the local rental values. After that, add in all of the possible expenses including taxes, maintenance, mortgage, insurance, and any other expense you can possible think of. Put that in what is called the gross rent multiplier formula.
The Gross Rent Multiplier Helps Decide Rental Value
There is no sense in buying investment rental properties unless you have some way to earn money from them. If you aren’t going to make a profit on the monthly rent, you’d better be making a lot of money from the increase in value instead. Having rental properties can be a huge headache if they are losing money.
With the gross rent multiplier you have a quick and easy way to compare each property you look at to see which ones are going to earn money. You basically divide the price of the property by the yearly rent. You’ll come up with a figure but you still need to know what the average GRM for that particular neighborhood is for the best overall comparison. You can also use the formula backwards by taking the yearly rental of a house and multiplying by the GRM to get what the home’s worth as a rental may be.
While using formulas is a great way to compare investment rental property values, you still need to look at maintenance, your time to manage the property, the future value of the property, and any other factors that you can think of. It’s only by doing the research and putting in the numbers that you can arrive at a valid comparison to all of the other properties you are interested in. For more information visit here.