Many people dream of owning an investment property or adding more properties to their portfolio. And for good reason: investment property can be a solid passive income vehicle that provides decent returns.
But like any other investment, you have to define your goals and consider several factors to choose the right solution for your needs.
Before weighing your investment options, write down exactly what you want to accomplish with your rental property. Perhaps, you want to make $300 in passive income each month. Or, you want to make 10 percent return on your investment in ten years. A clear goal will help you rule out the rental properties that won’t perform the way you want.
Once you’ve got a goal, you’re ready to analyze rental opportunities. Here are the qualities we find make for the best investment.
Location and Property Age
It’s all about location, right? Look for properties that are near highly rated schools and have access to amenities like pools and community parks. Scout areas within close proximity to major highways and places that offer many employment opportunities.
Stay away from properties over ten years old. Around the ten year mark appliances and structural parts of the home start needing replacements. Looking at homes under ten years old can save you a lot of headaches.
If you do find a great deal on a home that’s older, identify areas needing repair with a thorough inspection. The foundation, roof, A/C and plumbing are big-ticket items you want to pay close attention to because they’re expensive to fix.
Rental Property Size
Ideal property size is between 1,500 – 2,000 square feet. This amount of space is easy to manage and allows for comfortable size bedrooms. Properties larger than 2,000 square feet don’t always command higher rents, but they cost more money to maintain overall.
Price and Income Strategy
Special deals, discounts and price are major investment qualifiers since the initial purchase dictates whether you make or lose money on the investment. At a minimum, our team looks to buy houses at a 20 percent discount.
Passive income is generally a better income strategy than speculating on property value gains. Cash flow is something you can control now, where future resale value is unpredictable. Overall the Texas housing market fluctuates very little, so hoping that you’ll strike it rich years down the road is an unrealistic approach to investing in rental property.
Location Within DFW
Where you should purchase is completely dependent on your goals. Plano, for example, is an area you can consider if you’re less concerned with cash flow and more concerned with appreciation. If your desire is passive income, North Fort Worth will offer greater opportunities for cash flow but less appreciation.
Choosing the right location also comes down to knowing what an area is all about. A good deal in a less developed location may sound good, but there’s usually a reason for the deal – proceed with caution.
How can we help you?
Fleshing out your goals and choosing a rental property can feel overwhelming when you do it alone. That’s what we’re here for! We can crunch the hard numbers for you to locate the right property. Contact us today to get started.
Featured image by Ed Gregory via StokPic.