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One of the most common mistakes people looking to break into the rental-property market is buying a property that looks good to them, as opposed to what’s going to look good to the renter. When purchasing a rental property, keep the following key factors in mind to ensure you’re making a good investment.
Assess the neighbourhood
Before you even look at the property itself, get a good sense of what the neighbourhood is like. Many renters won’t even consider moving to an area that doesn’t fit their criteria for safety, opportunity and environment. Regardless of how nice or reasonably priced the building is. On the flip side, do give serious consideration to owning something in a neighbourhood that’s on the up-and-up. When looking at the neighbourhood, consider several different aspects.
- First, what is the crime rate there? Will your tenants feel safe at night in a ground-floor apartment or walking home from the market?
- Next, take a look at the schools and the job market. Many families will opt to be in a good school district. Young professionals want to ensure they’re within reasonable commuting distance to career opportunities.
- Amenities are important to consider, too—is there a local market so tenants won’t feel stranded if they’re car-less? Does the neighbourhood have any features that enhance the ambience, like parks, playgrounds or pools?
Finally, do a little extra homework and see if the neighbourhood has a lot of vacancies or if there is rental demand. Vacancies can indicate that it’s not a desirable area and has a high turnover rate as renters flee to better prospects. Additionally, if the vacancy rate for the area is low, this means you can raise rental prices without worrying you won’t fill a unit.
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Easy upgrades help improve rental demand
Next, focus on the rental property itself. Another common mistake for prospective buyers is to look at the finishes of a building rather than the bones. A well-maintained building with a good layout has much greater potential than a mediocre one with shiny new finishes.
Once you’ve established that the foundation, roof, plumbing and gas lines are in solid condition, mentally strip out anything dated or unsightly that can be changed. Especially if you can do the updating yourself.
Some of the fixes that have the biggest impact on a prospective renters’ perception of a property are also some of the easiest and cheapest upgrades to make.
- Inside the unit or units, refinish floors or replace the dingy or out-of-date carpet.
- Paint the walls a bright, fresh colour that makes the space feel bigger than it is.
- Focus particularly on countertops, plumbing fixtures and lighting.
It’s surprisingly cost-effective to replace dated Formica work surfaces, grungy chrome faucets and depressingly dim single-bulb light fixtures with newer, more aesthetically pleasing models. Given what a striking difference it makes, renters are willing to pay to make that experience part of their daily routine.
Include the grounds and communal spaces
When it comes to the exterior of the building, don’t underestimate the impression the building itself and its grounds will make. A fresh coat of paint goes a long way toward improving the desirability of a rental property. Also, ensure that it has adequate lighting around the door and walkway. It not only helps tenants feel safe in their home, but it also gives the property a high-end feel.
Additionally, putting a small amount of effort into the landscaping can yield big returns. Invest in planting evergreen foliage that will stay vibrant-looking all year long. You’ll have a property that tenants will look forward to returning to, even in the depths of winter.
If the building is a multi-unit property, don’t forget communal spaces and lobbies! Clean, well-put-together entrances make a huge difference when it comes to renters’ perceptions. It doesn’t matter how nice the individual units are if the lobby has ancient burgundy carpet, dirty corners and heavy cigarette smell in the air! Think of your property as a whole, and include the grounds and common spaces as important parts of that aesthetic.
If you can avoid being blinded by what looks good to you and instead focus on your tenant’s needs, you can be reasonably sure you’re making a good investment. Realizing that renters may be looking for different features and amenities than you are makes all the difference in picking out a property that’s likely to be lucrative.