Are you planning to buy a rental real state? But you are not sure which one? Then you came to the right place. Finding the right real estate is not easy, and we know that. You can check various factors, and you can still be unhappy with your choice. We will give you a couple of tips where to look and how to evaluate rental real estate.
There are four major factors you need to consider when evaluating rental real estate. Each of them is equally important. So, before you sign a contract and bring some furniture with NJ movers, check the real estate for the following.
1. Evaluate the location of the rental real estate
Location is probably the most important thing when it comes to evaluating rental properties. Depending on the place where your real estate is, you can set higher or lower price. And it is also important that your rental property is in a desirable location.
For example, some of the best locations are near schools and colleges. Since there is a great demand for apartments in those areas, you can set prices that are a bit higher. The students’ parents usually pay the rent, so you don’t have to worry whether you will get your money on time. And there will always be a lot of students! Therefore, you know that you will always have someone to live in your property.
Another good thing to have near your real estate is storage. If you rent the place to a family, they might have too much stuff that can fit in the apartment. Storage facilities in New Jersey are a good solution for them, and having those facilities near is a big plus.
Checking the neighborhood can help you evaluate rental real estate
Before deciding if the rental real estate is for you, check the neighborhood first. There are various things that can be useful when you need to assess rental real estate. So, when you are looking for the perfect locations, answer the following questions:
- What is the area like – urban or suburban?
- Is it close to the important spots, such as bus stops, hospitals, schools, parks?
- What type of people live there? It is very important to know if you are going to rent a place to families, students or seniors. Also, it is good to check whether that place is interesting to a middle or higher class. That can give you a better idea how to evaluate rental real estate.
- Will your rental property be in constant demand? You can never know when your tenants will leave your apartment, so it is good to know that you can find new ones easily and quickly.
- Is it close to the place where you live? After all, you will have to visit your tenants once in a while, and you don’t want to spend too much time on that.
- Is the neighborhood in progress or people are leaving? Are there any new buildings or the old ones are getting empty?
- Will the neighborhood grow in the future? Will there be new companies that will open positions for some well-paid jobs in New Jersey? That can increase the value of rental real estate a lot.
2. Evaluate the financials of the property
Firstly, you need to set your budget. You have to be aware that you need to invest some money first, and then to gain a profit. Check how much you can spend on possible repairs and makeovers. See where you can get additional funds if you need them.
You should also check the value of the rental property. Ask the previous owner to show you the actual income and expense sheets. Then you should calculate Net Operating Income (NOI) for the real estate. The standard vacancy rate is also one of the things you need to check. There will probably be times when your property will be vacant. And you need to be sure that you will not lose too much money during that period. You should also check the projected rents for properties in that area. That could give you some guidance how to evaluate rental real estate that you could own.
Additional costs are very important. Research about the insurance costs, taxes, and property maintenance costs. Once you have calculated everything, you will see if that rental property is worth buying. Also, check the prices of other rental real estates in the area. Make sure you don’t overpay.
3. Evaluate the possible repairs and makeovers
First, you need to see which repairs you are willing to make. Are you OK with doing a complete makeover, such as new plumbing, electric, floors, walls? Or you want a property that only needs painting and new carpets? Once you decide that, you can narrow down your list of a possible real estate.
When you visit your future rental property, see what kind of repairs it needs. After you do that, calculate if you have enough funds for doing those repairs. Keep in mind that repairs will usually cost more than you evaluated. And they can take some time, which will directly affect your profit. Your property must be vacant during the repairs. And that is the period when you lose some money. Think if you are ready to make that sacrifice.
4. Evaluate rental real estate comparing to the current market
Don’t buy rental real estate just because you think you can set a high rent. If it doesn’t fit most people, no one will want to rent it. Check what people are looking for and try to find something suitable. Also, look for the properties you can sell easily if needed. And, of course, not to lose money doing that. If you can sell the property easily, that means it is in great demand. Consequently, a lot of people would want to rent it. And that brings you some profit.
Keep in mind that most people don’t want a huge swimming pool or private cinema. They are usually looking for a house with functional bathroom and a strong roof. You want to make your property desirable to most people, so some of them would want to hire long distance movers NJ and come to your property. And you sure want the same. So make sure to evaluate rental real estate properly and watch people contesting to live in your property.