Factors of Great Residential Rental Property Investments

Before you get caught up in thinking every one of these factors must be perfect before you buy a rental property, know that it’s rare for this to be the case. Your goal is to try to maximize each of these as best you can, and sometimes one can be more important than others. Here are the factors that you look for in a great residential rental investment, single family or condominium:


Yes, you can say it three times, as real estate is all about location. You wouldn’t want to rent a home in the middle of a supermarket parking lot, but one near a green belt or park for your children could be just right.


Location is a part of this factor. However, if a home is in a great location, but the competition is stiff, it may not be the best investment. When there are many rentals available and owners are offering incentives, it may not be the right time. When there are few rentals available, not only are you able to keep a property occupied better, you can demand higher rents at the same time.


This is relative, as property taxes are a major expense, but some areas command high rents because of the area amenities, so taxes are higher as well. If you can offset expenses with monthly cash flow left over, then it’s a positive.


Though cash flow is the primary consideration, appreciation in value over time is important. There are two ways in which you build equity in a rental property, appreciation in value and paying down the mortgage. Intelligent leveraging of your investments can be used to grow your portfolio using the equity in owned properties.

These are your main considerations, of course, you’ll be looking at the age of the property, expected repairs over time and any necessary improvements as well.

The Rental Property Location and Acquisition Process

You’re ready to get started and buy your first rental property. You have the down payment for your desired price range, and you want to make an informed purchase decision.

Know your market area

Take the time to do a thorough analysis of your market area. You may have a specific neighborhood or area in mind, but you want to broaden your research to have the knowledge you need for comparisons of possible properties. Learn what properties are selling well in your price range. Do some research at the courthouse for areas where homes are selling for cash. Investors are the normal cash buyers, so you’ll know the areas other investors, some very experienced, are buying into.

Learn how to value properties

Learn how real estate agents do a CMA, Comparative Market Analysis. The first thing most successful investors will tell you is to buy below market value. This locks in a profit at the closing table. It also makes it easier to generate an acceptable profitable cash flow when mortgage payments are lower.

Analyze rentals and competition

Dig into the local media where rentals are advertised, both print and online in Craigslist. When you’re researching a neighborhood, get the average rental amounts for the type of properties you’re considering buying. How many are available, are owners offering incentives like free months? Know what you can expect for rent.

Nail down expenses

The expenses here are the normal ones like normal repairs (budgeted), real estate taxes, insurance, etc that will apply to every property in an area. A mistake here is just as bad as getting locked into a below-market rent for a year; throwing away profit. The condition of actual properties you are considering is a separate thing, though you will want to budget for obvious repairs you know will be coming for an older property.

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Locate the bargains and negotiate a deal

The next section will talk about finding the best rental property deals, but it is a part of this process that is crucial to long-term profit. If you’re paying retail, for the life of the ownership period, you’re losing profits.

Those are the pieces of the location process, but here are some specific sources for the best deals.