Features of a Profitable Rental Property

Features of a Profitable Rental Property

When investing in rental property, you obviously want to purchase that property which is the most likely to offer the greatest profits. While there is no way to guarantee the profits that you will receive from an investment property, there are a few key factors to look for in a property that will help to significantly increase your chances of enjoying the profit that you seek.

Location, Location, Location

Everyone knows that “location, location, location” is the number one rule of real estate, and this absolutely holds true when it comes to rental property. Therefore, the first thing you will need to consider is the neighborhood in which the property is located. While you may not be able to afford a property in the city’s most popular neighborhood, there may be some great options available within an up-and-coming neighborhood.

Consider the location in terms of the amenities that are available, the schools serving the neighborhood and the proximity of employment opportunities. Crime rates and vacancy rates are also important considerations. After all, if you purchase a property in a relatively safe location where the vacancy rates are low amongst rentals, you likely will not have difficulty finding a tenant. Similarly, you will be able to command a higher rental price if your property is located in a desirable area.

Bathroom and Kitchen Condition

It is no secret that bathrooms and kitchens are the two rooms that are most important to most buyers. Therefore, you want to be sure the bathrooms and the kitchen are fully updated and comparable to other properties in the area. If you already own the property, you can make it more appealing to potential renters by updating the kitchen appliances, changing out the countertops and painting the cabinets. In the bathroom, updated hardware, a new showerhead, and fresh tile can go a long way toward making the space more appealing. As a side bonus, renovations to these spaces will also increase the overall value of your property if you decide to sell at a later date.

Cost of Property Taxes and Insurance

The cost of property taxes and insurance can put a greater dent in your profits than you anticipate. Therefore, it is important to investigate these costs before making a purchase. Keep in mind that the most sought-after cities and neighborhoods are typically hit by much higher property taxes than other cities and neighborhoods, so don’t make assumptions about these costs. Similarly, the cost of insurance can increase significantly depending upon the location of the property and the types of natural disasters that may affect it. For example, adding additional coverage for things such as floods, hurricanes and earthquakes can increase your overall costs significantly.

Average Rental Prices for the Area

Obviously, you can increase your profits by increasing your rent, but you also cannot increase the cost beyond what the market will accept. Therefore, you need to research the average rental price for properties in the area so you can have a clearer idea of how much you can expect to reasonably ask for your property. Subtract this from all of your costs, including mortgage, property tax, insurance and maintenance costs, in order to get a clear idea of how much you can ask for your property in order to maximize profits.


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