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Buying rental properties is a good way to increase your
assets. However, choosing the right rental property will be
challenging. Here are a few things to check for prior to
buying rental property.

1. Location - Most people don't want to live in the boon
docks.  The location of your rental property will determine
how easy it will be to rent. If you have a lot of vehicle
traffic, you may receive a greater response from a sign at
the location than you will from a newspaper add.

Tenants want to live in nice neighborhoods close to all the
amenities. They want to be close to the schools, stores,
recreational locations, hospitals, and work.  I haven't met
anyone who wants to live in an undesirable neighborhood or
drive 15 minutes for a gallon of milk.

2. Numbers - When buying rental property you want to check
the numbers. Make sure you have all the expenses associated
with that property and make sure it still has a positive
cash flow.

Take into consideration the maintainence issues, any
utilities not covered by tenant and ammoritize the cost of
the big projects like furnace replacement, new roofing,
siding or painting.

These projects only happen once every 15-20 years but you
may be coming in to this in the 10th year of that cycle.
Remember to calculate your expenses high and your income
low. This can save you some surprises down the road.

Expect the unit to be empty at least one month per year due
to turn over. You will have to repaint and clean the carpets
the first 2 weeks, then advertise and show the next 2 weeks.
You should only count on 11 months of rent per year.

3. Lower Maintenance Buildings - You want to avoid homes
that will require expensive routine maintenance.  Some
examples would be homes that have cedar-shake shingles or
siding, wood sided buildings, wood frame windows, brick
driveways, cedar decks, etc.

Try to look down the road and determine the future
maintenance needs. Remember the lower the maintenance the
less headaches and larger profits.

4. Higher Home Prices - Check in towns with higher home
prices, because this increases the demand for rental
property. Look for the ugly house on the block that has a
lower price, enabling you to purchase within the margins.

After some interior and exterior paint, a little light
landscaping and new curtains, viola?, a house that will get
premium rent because of the class of neighborhood.

If people can not afford to buy a home in this class they
will have to rent. This will create a demand for rental
property.

5. Below Market Rent prices - When buying rental property,
look for rental property which has rent prices that are
below current market rents.  This will allow you to raise
the rent and increase the value of the property. As per
above, this may just need a little fluff to enable raising
the rental price.

Rental property market value is determined by the amount of
income received by the rental property.  However keep in
mind, if the rental property has renters when you purchase
it, they may not like it when you raise the rent. Also check
to see what type of lease is in place. The lease goes with
the sale.

If the current renter is paying a substandard price and has
1 ½ years left on the lease it could turn out to be a losing
proposition.

There is only one way to cut a lease short as a new owner.
You must remodel the place. Check with the local housing
commission to see what the minimum cost requirements of
remodeling are for immediate eviction of current lease
holders. It is usually as little as $10,000.00 in remodeling
cost to get a remodeling eviction. By the way, you didn't
hear this from me!

6. Good Rental History - Whenever buying rental properties,
you must check the rental history. Check to see on average
how long tenants are staying and do they pay their rent on
time. Some areas of town are naturally quick turnover times.
Near airports, loud bars or nightclubs, near military bases,
etc.

7. Complies with Zoning and Fire Codes - Make sure you check
to see if there are inspections required by local officials
for rental properties and does this property pass those
inspections. You never know the real reason the current
owner is selling the property. 

It may need extensive repairs to pass the inspections. A
quick red flag would be if the electricity has been turned
off for over 90 days. They will usually require an
inspection before restoring power, especially if it is a
known rental.

8.  Less Than Twenty Years Old - This is self explanatory,
if you restrict your selection to buildings that are less
than twenty years old, you will limit the chances that the
building will have any building code or maintenance
problems.

The building could be near the maintenance cycle for roof,
paint and possibly furnace but the structure will be sound
and not needing upgraded windows, siding or cement repair.

9. Out of State Owners or Managers - When buying rental
property, look for properties that are owned by out of state
owners.  It is hard to manage rental property from out of
state and when these come up for sale, the owners are
usually more concerned with selling quickly than getting top
dollar.

In order to rent a place quickly you must live near by so
you can show it at the caller's request. Often times they
will ask to see it in the next 20 minutes or so. Cater to
their requests and show it quick. Most renters need a place
within the next week or so and will not wait to see your
place until next week because you are busy.

Most times they will make a decision before tommarro when it
would be more convienent for you to show it. This has happen
to us to many times.

Never give out the address for drive bys. Prospective
renters will ask for the address to do a drive by and just
look at the place. Don't waste your time with these folks.
Insist on showing it in the next 30 minutes or you will not
give out the address as a courtesy to the neighbors.

10. Neighborhood is stable or improving - obviously avoid
neighborhoods that are declining, look at the writing on the
walls and stay out.  Although these may look good due to the
low purchase price, they are very difficult to collect the
rents.

By finding neighborhoods that are stable or improving, it
will be easier to rent the property and you will be able to
increase the rent. The general consensus is, the better the
neighborhood the higher the purchase price and the higher
the rent prices, therefore the margin for profit is greater.
The poorer the neighborhood the lower the purchase price and
lower the rent prices reducing the profit margins.

Do not be afraid to buy nicer places for rental properties.
The people that can afford $1000.00 a month are more likely
to be able to come up with the rent on time versus someone
that can only afford $350.00 a month. One little upset in
the latter case and you will not get your rent on time, if
at all. There is far greater stability in renting high end
places versus being a slumlord!

Brian Ankner from Southpoint Services,UBTO asks you,
Why in the world would you apply for any type of Home
Equity Loan before researching the necessary information
to prepare yourself before feeding yourself to the
loan lions! Go to http://www.loan-tricks.com , Sign-up
for the free 11 part e-course to get your suit of armor!
Don't let the loan lions have their pound of flesh!