• Kirstie Hines

The Top 3 Things You Need To Know When Finding A Profitable Rental Investment

Owning a rental property is one of the most effective ways to earn a lucrative income; however, for your investment to be profitable, there are several things you must know. From conducting a systematic evaluation of the housing market at the macro-level, to narrowing down your options and considering opportunities at the micro-level, the decision you make could be the difference between a thriving property empire, and a bad investment. 

Here are three things you need to consider when finding a profitable rental property. 

Find The Right City

Location is the single most crucial factor in determining the return on your real estate investment. Choosing the right real estate market will ensure you reap the highest return on your investment and keep you in profit. There’s no surefire way to find the best rental investment market, as this can mean different things to different investors; however, profitable rental markets tend to have certain factors in common. 

Beginning your research at the macro level can help you to identify a strong investment city. Good investment cities can often be identified by their high population growth, growing job market, and future development plans. However, there are also other factors to consider, such as insurance costs, crime rates, and the current volume of rental properties available. In general, cities with a high demand for rental properties provide the best rental investment opportunities. 

When narrowing down your ideal rental market, you should also look at profitability indicators, such as the average rental income and the median list price of the property in your proposed area. You can easily find this data online by utilizing real estate websites such as 

Find the Best Neighborhood

Once you’ve decided on the ideal investment city, the next step is to narrow your search down to the neighborhood-level. Even within a generally profitable city, rental opportunities can vary significantly between neighborhoods. Factors such as the school zone, local amenities, and access to hospitals and public transport, can all make a massive difference in the rental demand of a neighborhood. 

It’s crucial to perform a neighborhood analysis on all potential neighborhoods you’re considering. For example, you should aim to find out the median listing price, average rental income, as well as occupancy rate and cash on cash return. You can use this data to determine your profit margins, and estimate what your potential ROI could be. 

Find The Ideal Property

Finding the ideal rental investment property isn’t always straight forward, and can vary depending on your investment goals. In general you should ideally look for properties that need little work and are move-in ready. This can help you to avoid spending time fixing it up before tenants can move in. The longer your property stays unoccupied, the more potential rental income you’ll lose.  

This is especially true if you’re new to investment properties, or have little experience renovating homes, as without a reliable team of contractors and professionals to call on, buying a flip home can be a costly mistake. 

As a landlord, you will be responsible for the upkeep of the property, so it’s essential to invest in one that is in good condition and won’t require a lot of ongoing work to keep it at a suitable standard for your tenants. 

If you’d like some more information about investing in a profitable rental property, head over to our Podcast, where you’ll find useful hints and tips about everything from personal finance to real estate investments. 

If you'd like to learn more about real estate investing and gain valuable information, check out our podcast.

All information and materials in this article are for educational purposes only. Opinions expressed in this article are based on information considered reliable, but The Daily Money Show cannot guarantee the accuracy of the information nor should it be relied upon. The information discussed in this article should not be used as a recommendation to buy or sell securities nor should it be taken as investment advice. The Daily Money Show is not a Registered Investment Advisor or Broker Dealer. The Daily Money Show is not an accounting firm and does not give tax advice regarding any security or real estate transaction. You may want to consult with an accountant, attorney, real estate agent or financial advisor before proceeding with any transaction regarding securities or real estate.

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