Hello, property and potential property owners! Welcome to the RPM Distinguished Care blog, where we provide practical advice about property management. If you’re a return visitor, welcome back and we appreciate your support! RPM Distinguished Care specializes in managing successful rental properties in and around the Charleston area. We’re here to make your lives easier by giving you the resources you need to maintain a stellar rental property. If you haven’t already, make sure you check out our previous post on how to maintain a well-kept lawn in the summer months. We provide tons of tips to make sure the exterior of your rental property looks stellar!
Today, we’re detailing the things you should keep in mind when searching for the perfect rental property. The hunt for a rental property is full of ups and downs. Just when you think you’ve found the rental property of your dreams, things can change in an instant. Well, we’re here to say, that may be for the best. Owning your own rental property is no small feat and, therefore, you should dedicate as much care as possible to your selection. Read on if you’re interested in knowing the essential aspects of a good rental property!
Location
Location is such a vital factor when determining which rental property is right for you. The reason is because several other factors which influence the profitability of your real estate investment are dependent on (or directly tied to) location. Location is more than just what natural scenery is available or how close the property is to a grocery store. Let’s go through the aspects of a rental property which are affected by location.
Job Market
Small towns are less likely to have booming job markets than big cities. This doesn’t mean you shouldn’t invest in real estate in small towns. Instead, you should keep in mind the property’s proximity to employment opportunities. Will a tenant need to drive forty-five minutes to the nearest city or metropolitan area? Are there industries which operate out of the area and employ hundreds of people? Individuals, and their families, move for work-related reasons everyday. Capitalize on this fact and invest in property where people will need to move.
Housing Market
Though the housing market may be booming nationwide, the picture can change when you apply a magnifying glass. Not every town or district is feeling the same benefit from lofty housing prices and low interest rates. As well, when investing in real estate, there’s an expectation that whichever piece of property you purchase will continue to appreciate over time. The national average for annual home appreciation is 3.5% to 3.8%. This rate is subject to change during certain years and within certain areas. Up-and-coming areas, wherein businesses are choosing to settle down, are more likely to appreciate in the long term.
Amenities
This section does have to do with how close the property is to a grocery store, actually. Being minutes away from essential establishments and services will always be a selling point—for you and your future tenants. When searching for a place, try to think of what you enjoy having close by. An exciting night life? A 24-hour gym? A community center? Nature trails, mountainous hikes, a lake? Everyone’s interests will vary but the essentials never do. A grocery store, a post office, and a hospital are easy enough to seek out in any city or town.
Education
Education is a major selling point among parents, especially those with young children. Do your research about the school system of the area of your potential property. Are the schools rated well? Are their private options? Charter schools? Daycares? Whether or not an area has access to a reputable school can make or break a tenant’s decision to move in. Therefore, even if you don’t have children yourself, take the time to ensure your tenant’s kids will have access to a quality education.
Crime Rate
The safety of a particular area is another factor which can encourage or discourage a potential tenant from signing their name on the lease. Crime rate statistics are easy enough to search. You can use a crowd-sourced platform like NeighborhoodScout or the Federal Bureau of Investigation’s Crime Data Explorer to identify crime levels in certain areas. The statistics to keep note of are the rate of person-to-person crime and the rate of home break-ins.
Ideal Tenant
Identifying your ideal tenant is a necessary step in the property buying process. If your ideal tenant is a young student who will only require a year lease, then perhaps you won’t invest in a three-bedroom house ten miles from the closest college campus. If your ideal tenant is a couple with two kids who will live in your property for years, then perhaps you won’t invest in a one-bedroom apartment. You don’t have to be too specific about what kind of tenant will live in your property. The point of this exercise is to give you a basis for what to look for, as well as the ability to anticipate your future tenants needs.
Similar Listings
Once you have a clear understanding of what your future tenants will require from your property, you can pin down a potential rental. After you have a property in mind, you can compare similar listings in the area. This will give you an accurate sense of how much is being charged for properties which are similar to yours and, thus, competing with your (potential) property. This standard will come in handy during the next section, in which we determine profitability.
Profitability
Of course, maximizing profitability is a key goal of anyone investing into real estate. How much profit you’ll be able to make owning a rental property is dependent upon the value of the property and how much you charge in monthly rent. According to the one-percent rule (which we discuss in detail in our post, ‘Maintenance and Upkeep: How to Stay Ahead of Repairs with Your Rental Property’), you should charge 1% of the total value of your property for monthly rent. Using this equation, a house valued at $165,000 should have a corresponding monthly rent of $1,650. If you bought the house with a twenty percent down payment, a fifteen-year commitment, and a 3.92% interest rate, the mortgage would be $971. If you charge $1,650 and pay $971 (not including taxes and insurance) in monthly fees, your maximum profit would be $679 per month.
You can use any run-of-the-mill mortgage calculator to calculate your mortgage payment and perform these calculations. Do the math to see if a rental property is achieving you the most bang for your buck.
Minimal Repairs
Major repairs or renovations can quickly eat into profits and add stress to your life. You want to look for a property which only requires minor cosmetic repairs. A coat of paint or new floors is nothing compared to a new rook or HVAC system. Similarly, water damage is definitely a no-go. Ideally, you’ll want to find a rental property that is as close to move-in ready as possible.
Property Tax
Property taxes vary by state, which means you’ll need to check with the Department of Revenue, or whichever government agency handles taxes in your state. The state of South Carolina has one of the lowest property taxes in the country. The average effective property tax rate is 0.55%. Compared to the national average of 1.07%, that’s nearly half. Now, the property taxes on investment properties are a bit different. In South Carolina, property taxes on second homes or investment properties caps at 6%. In select cases, you can apply for a rate of 4%.
Parking
Ample parking is always a plus. This doesn’t have to be a driveway; street parking or a shared lot are great options, too. If a tenant has to pay to park their car on the street or inside of a parking garage, then this could act as a deterrent to potential tenants.
Newer Property
Newer properties are less likely to have incurred as much damage as older properties. This isn’t to say you shouldn’t invest in older properties—or you should only seek brand new properties—but rather, you should heavily investigate older properties to ascertain whether they have structural problems. Loose siding, crumbling steps, and poor drainage may seem like minor problems before you sign the deal, but once your name is on the dotted line they may become major issues. Better safe than sorry!
Outdoor Space
Outdoor space in the form of a backyard or a nearby park can be an attractive feature for your rental property. Tenants with kids or pets will enjoy the opportunity to get outside and enjoy nature. This feature becomes even more valuable the closer your property is to a city.
Natural Light
The presence of natural light within a property may seem insignificant, but it’s actually quite important. Psychologically speaking, natural light is scientifically proven to release serotonin in the brain, improve sleep, and ward off mental illnesses such as depression and seasonal affective disorder. Think about it: Who wants to live in the dark?
With Real Property Management Distinguished Care, we treat your property as if it were our own.. No hidden fees, only safeguards and guarantees. Up-front packages you can review and prepare for right here on our website! If you’d like more information on how we address and plan for maintenance, don’t hesitate to reach out. We are more than happy to assist you in setting up the perfect property management service for your properties. Protecting your investments is our priority!
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
