Real estate investors set their sights on single family properties for a number of reasons. Unlike larger apartment buildings or strip centers, investors only have to worry about one tenant at a time. Maintenance costs are typically lower for single family properties and financing can even be easier to obtain when compared to the process needed for a light industrial or automotive property. Still, investors interested in single family rental properties should conduct a substantial amount of research before selecting their first opportunity. Here are some key factors to consider while conducting one’s due diligence.
Location, Location, Location
Everybody knows that location is one of the most important considerations when buying a home or rental property, but what exactly does that mean, and what should you be looking for when you're hunting for the ideal opportunity? Location means a lot of different things, and here are a few of the factors you should keep in mind when exploring different spots:
- Find a property in a safe neighborhood with low crime rates
- Look for schools, groceries, healthcare facilities, and other nearby amenities that would make the location appealing
- Pick an area that has good prospects in terms of employment, because you'll have an easier time renting in an area that’s economically prosperous
- Make sure you know how the location is zoned, and check into whether there are any plans for future developments (that open green space across from you could be destined to be a mini-mall, for instance)
Remember that you don’t necessarily need to restrict your search to your own town or city. You may be able to find a great property for a lot less if you look outside your home territory.
Check out the Rental Potential for Any House You're Considering
It’s important to identify all the ways you can maximize your income potential. For starters, when you find a single family property you're interested in, look into the rental demand and vacancies in the neighborhood. Even if you have the perfect property, you're going to have trouble renting it if you're in an area where there's no demand or if there are already a high number of available properties that you'd be competing with. Furthermore, ask about the going rate for rentals in the area, because you need to ensure the income you'll make from the property will cover the property taxes, expenses, and mortgage payments.
Determine your game plan
Your long-term financial strategy will play a very large role in the type of property you purchase and the loan you secure to set that strategy in motion. For example, consider two options involving an investment property in need of repairs. If an investor were looking to fix and flip the property, they may want to work with a hard money lender that offers a reasonable short-term loan. On the other hand, if they want to improve the property and then hold onto the investment, they may be better served by a long-term solution from a bank or non-bank alternative lender. One thing novice real estate investors may not know is that commercial lenders can offer solutions for single family investment properties. The general requirement is that the investor cannot live in the subject property at any time. Commercial Direct is one such lender. We are able to provide long-term, yet flexible financing solutions for duplexes, triplexes, and a number of other 1-4-unit properties.
Taking the next step
Single family rental properties can be a great investment opportunity if you conduct your due diligence and establish a solid long-term strategy. If you need financing for an investment property now, feel free to reach out to one of our mortgage experts at 1-855-585-5352. We can describe our solutions for single family rental properties and help you determine the best course of action for your particular set of needs.
Salomon Wancier is a creative and innovative Marketing Executive and Business Coach with 19+ year record of achievement managing marketing teams, forming strategic alliances, developing and directing marketing initiatives and using multiple vehicles/channels in continuously changing environments to increase sales and profits.