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Best Rental Properties to Invest In

By Jacob Lundquist

Photo courtesy of 401(k). Keep in mind, the “2% rule” (which states that your monthly rents should be ~2% greater than the price of the unit or home, plus repairs), is sometimes too much—especially for first-time buyers. That said, you should set a goal, calculate all of these local factors in, and then come to a conclusion about what rents to charge.

This list is designed to help you know what properties are best to begin investing in. Look for properties with:

1. A solid, reputable HOA. Home Owners Associations (HOAs) can cost wildly different amounts, depending on where you live and what type of property you own. However, their help to you can be infinitely valuable. Benefits can include solid maintenance and management groups, insurance stability and coverage, amenities offered like pools and patios, and community appearance standards and regulation. Remember that HOAs are also enforcement associations, and can charge membership and maintenance fees.

2. Easy avenues for marketing. Certain areas never pay a cent for marketing fees. Areas that are inundated with claims on local property (like West Campus!) often don’t need much, if any, marketing tactics. However, you may see this as a downside. If marketing strategies are your strong suit, look for highly-competitive areas with agent- or ad-based advertisement.

3. Solid maintenance staff. You may find a property with dedicated maintenance staff, or you might need to pay some folks to do that work for you. Either way, making sure that an exclusively-oriented group of workers is keeping up with maintenance, which makes both your residents and your HOA happy.

4. Simple utilities. Regarding utilities, you can choose to bill back specific residents for their individual portion of the utilities, or average and aggregate the utilities data in order to build in these charged into the rent. These are both good strategies, but might not effectively take into account insurance and utilities. Also, remember that utilities charges might still be made to vacant properties, if anything is still being used!

5. Insurance and tax zones. Property taxes vary based on state and city, but might be super low. Make sure you know that the taxes are for any rental property you hope to buy. Make sure, also, that you understand local home owners insurance requirements. Rates for this can also vary wildly.

The costs associated with rental properties go way beyond just the initial fees. However, buying to rent is still incredibly lucrative and, in some cases, rather straightforward. Understand, as much as possible, all of the ‘extraneous’ fees that will inevitably pop up during your time as a property owner.

And if you have any questions, make sure to contact us at 512-897-0009.

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