Congratulations! You have decided to invest in a rental property. So, where do you go from there? How do you know which location is best? Let’s talk. 

There isn’t a magic formula. Neither is the answer the same for every investor. On the other hand, there are key issues to consider. Here are six essentials. 

Does the neighborhood primarily consist of homeowners? When someone owns their own home, they tend to be more committed to long-term home maintenance, yard upkeep and developing neighborhood relationships than when they rent.  If you invest in a property located among owner-occupied residences, your property has a better chance of maintaining its tenant-attraction factor and value. Why? 

• • • When the neighbors maintain their yard upkeep, the tenant next door is more likely to keep his yard in decent shape. It has a positive effect on property value, the amount of rent you can charge, and the quality of tenants you will attract. 
    • Homeowners tend to grow roots – they are committed to long–term residence. They take time to know their neighbors, and neighbors who know each other watch out for each other. This indirectly promotes lower crime rates. 

Is the neighborhood in a well-rated school district? If you are investing in single-family homes, the school district is a significant factor. Families who are highly satisfied with and involved in the local school district do not want to move, which means you have less turnover.  

 Does the neighborhood connect your tenants with opportunities  

• • • Are there job opportunities, from small businesses to professional practices, to light industrial facilities, and more? 
    • Are recreational activities, from public parks and hiking trails to gyms and pools, as well as indoor and outdoor sports, located within a reasonable distance? 

 What is the median income? HomeUnion suggests that the average income level in a neighborhood can make a significant difference in your decision. Higher median income areas typically have higher-priced homes, making it challenging to meet the 1 percent rule. On the other hand, while low-income areas mean more affordable rental investments, it typically means higher turnover, which is costly. But, as they point out, moderate-income neighborhoods often result in tenants who stay longer, while your investment is more manageable. 

 What are the typical rent and listings? Knowing what rent you can expect in ratio to the cost of the property is essential, of course, but there is more to the story. If there are a high number of listings (which indicates vacancies) in the area, it may indicate that finding tenants will be a challenge. Worse scenario, it may indicate that the area is losing its attraction for renters, which means you may soon be lowering your rent. Look for areas where listings are low. It reveals either long-staying tenants, high-demand, or both. 

Pay attention to local developments. Investopedia recommends checking with your local municipal planning department. On the one hand, multiple construction projects can mean it’s a good growth area. Pay attention, however, to developments that have the potential to hurt property values. 

All the above considerations will be conducive to cash flow and passive income – which should be your primary reason for investing in a rental property. Ideally, your property will appreciate, but sometimes real estate values take a downturn due to sudden national economic changes and other factors. Appreciation is a for-the-long-haul factor, not a factor in your monthly return. 

Rentals America is your local property management company. We help you take care of your rental investments. 

About Rentals America 

Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management and we’re here to help landlords navigate the rental market.