Buying a Rental Property and Maximizing Your Profits

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Rental properties give potential owners a great way to generate residual income and provide housing to families in their preferred area. However, when taking on the task, it is necessary for the buyer to consider all angles to get the most out of their purchase. Renovations are a great way to increase the profitability of a rental property.

Conduct Market Research and Assess the Demand for Rental Property

Conducting market research helps the buyer find an area where rental properties are in the greatest demand. If there isn’t a market for rental properties in an area, it won’t present the buyer with a good investment. A great investment would be an area where the buyer has several choices when it comes to rental properties. This gives them a better chance to find a variety of rental properties that fulfill the needs of renters and increase the profitability of the property.

What Type of Properties are In the Highest Demand?

Identifying what properties are in the highest demand gives the buyer a chance to capitalize on a growing need. For example, if the target area needs more single-family housing, a rental property could provide a family with a much-needed home and give the new owner a steady income stream. When comparing housing, the buyer can determine how many bedrooms and bathrooms are preferred by most tenants. When assessing the rental market, buyers can contact Dustin Dimisa on Facebook for sound advice about their investments.

Reviewing Lending Options for Renovating a Property

An FHA mortgage with renovation allowance could provide the financing that the borrower needs to purchase a rental property and make vital changes. Buyers must have a credit score of at least 620 to get the FHA mortgage. Their income to debt ratio must be no more than 45%. The down payment could be as low as 3.5%, but most rental property purchases require at least 20 to 25% down to finance the mortgage. The drawback to accepting the mortgage is that the property owner must live in the property until the renovations are complete before renting the property to a tenant.

Identifying How to Maximize Your Profits

Identifying how to maximize the owner’s profits shows them how to use the entire space more wisely. For example, if the property is more than one story, the owner could rent each floor out to tenants. College students are always looking for inexpensive housing.

It is possible to maximize the profits by renting out rooms to college students and allowing them to share communal areas such as the kitchen, patio, or a swimming pool. Renovations also make it possible to make changes that increase the earning potential for the rental property.

Investors consider rental properties as an invaluable investment. When approaching the investment, the buyer must consider the demand for housing and what types of properties are most requested by tenants. Renovating an existing property could also give them a chance to rent out the space to multiple tenants. Rental property investors can evaluate their options by contacting a lender now.


David Cohen

Rachel Cohen: Rachel is a sustainability consultant who blogs about corporate social responsibility and sustainable business practices.

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