How Do You Know if a Rental Property is Profitable?

FHA Multifamily LoanOwning a rental property can be a profitable endeavor — if you find the right one. Some multi-unit apartments get high vacancies seasonally while others don’t yield adequate returns despite regular occupancy.

Many factors can affect the profitability of your rental property. It’s not as easy as buying the first one you’d find in the market; it takes a considerable amount of research to know if the property you’re eyeing is a real goldmine or not.

To guide you in your search, here the features you must pay attention to:

Neighborhood Quality

The quality of the neighborhood your rental property belongs spells which type of tenants you attract and how often you’d experience vacancy.

A rental unit close to schools and the business district would lure students and young professionals respectively. Its proximity to amenities, such as parks, gyms, cafes, and shopping centers, is a major plus.

Beyond question, the crime rate is a serious factor. Of course, nobody wants to reside somewhere where theft and murder happen all the time. Especially if you’re going to be an owner-occupant, you’d want a property you’d feel safe to live in with your family.

Rental Average

Knowing the average rent in the area is paramount. You can charge your rent too high for competitive reasons, and you likewise can’t make it too low to avoid compromising your income.

According to Bmfcap.com, ensure that the FHA multifamily loan can be repaid. If the most reasonable rent in the area wouldn’t suffice to cover your FHA multifamily loan repayments, taxes, and other property-related overheads, then you should keep looking.

Job Market

No potential tenant would flock to a city without many employment opportunities. This is why you must check first the ongoing and future developments in the area. If a new corporation would sit right in your backyard, chances are, you’d have consistent occupancy all year long.

Searching for a potentially profitable rental property requires a lot of legwork. Until you find the best candidate after you cover all the bases, you shouldn’t settle for anything less than promising.