One of the first questions new investment property owners ask is, “will my home make a great rental?” At Rent Portland Homes by Darla Andrew, we believe there’s a tenant for every home we manage. That said, certain features make some rental homes more attractive than others. So, before you purchase a potential investment property, consider the following factors:
According to the consumer credit reporting agency TransUnion, 73% of tenants consider unit size to be an influential factor when renting. As you might imagine, a 10,000 square foot West Hills palace would be out-of-reach for the average renter. Now that doesn’t mean there isn’t a market for this kind of home — it’s just much smaller. For property owners, a reduced pool of potential tenants to draw from means it may take longer to find your first renter. It also means your home could sit unoccupied for longer between renters. On the other end of the spectrum, while smaller homes don’t have the same affordability challenges as large homes, they’re less appealing to tenants with families in need of more space. Again, you’ll draw from a smaller pool of potential tenants.
In the middle sits your rental sweet-spot. The most recent Census data shows that between 2006 and 2016, the number of rental households with minor children increased from 12.4 million to 14.3 million. That represents a full third of all renter households. Those families will primarily be searching for medium-sized homes with 3-4 bedrooms and 2-3 bathrooms. Homes of this size provide plenty space at a price point most families can afford. Medium-sized homes also allow property investors to maximize their rental rates to meet higher demand.
You’ve heard the phrase “curb appeal” to describe how attractive a home is when buyers first see it. This concept also applies to potential tenants. Great rental properties should be clean and well-maintained to attract the best possible tenants. By contrast, homes with obvious cosmetic and structural flaws will turn away the most attractive tenants. In turn, lowering your potential monthly rental rates.
Besides, investment homes that are in poor condition will quickly eat into your profits through expensive repairs. If your home has issues in one of the five most significant areas — roof, electrical, plumbing, HVAC, and the foundation — the associated upkeep and repair costs might make it unsuitable as a great rental property. Plus, homes in poor condition also generate more maintenance calls, which are a massive headache for investment property owners.
Your Home’s Neighborhood
While the home itself plays an important role, great rental properties are also located in great communities. You can judge the health of your neighborhood in a few different ways. High crime rates would be a big strike against your community, as would poorly-maintained nearby homes. Your neighborhood’s physical location is also a key consideration for potential tenants. Easy freeway access is a huge plus for commuters. And homes sitting close to parks, grocery stores, shopping, and entertainment options are also highly valued.
Low Vacancy Rates
One great way to judge the health of your neighborhood is to check rental listings and vacancies. If your community enjoys low vacancy rates and fewer listings, it’s a good sign that there’s a stable group of happy homeowners and renters living in the area. On the other hand, high vacancy rates and lots of listings could be a sign your neighborhood is in decline. More listings also mean your investment property will face stiffer competition, which could force you to lower your rental rates to be more attractive to potential tenants.
Local Schools Districts
Your investment property’s location connects with a local school district. For the average family, good schools are one of the primary reasons why they’ll choose to live in one neighborhood over another. In many areas, the difference between living in an okay school system and an excellent school system could only be a matter of a few blocks in any direction. If you’re searching for an investment property to buy, school district quality should be one of your primary considerations. If you already own a home you’d like to convert into a rental, understand that the health of your district could be a prime decision factor for your potential tenants.
We Can Help
So to summarize, your home’s size and condition will help you draw from the largest, most qualified tenant pool. Your neighborhood’s quality, physical location, access to amenities, and excellent local schools will help your home stand out against the competition. For investment property owners, getting the most out of all five of these areas will help you find the best tenants, keep them in your home for longer, and maximize your investment’s return.
Of course, you don’t have to do this on your own. Rent Portland Homes by Darla Andrew can help you determine if your investment property would make a great rental with our free rental analysis. Our expert team of property managers can suggest possible property improvements you can make that will help maximize your return on your investment. If you’d like to learn more, contact Darla today at (503) 515-3170, or you can fill out our contact page, and we’ll get back to you ASAP.