I own eight rental houses in Hanoi-Vietnam and I am still planning to buy as many as I can throughout the next ten years. I invest nearly all of my saving into rental properties because they provide great tax benefits and fantastic return. However, not just any buy-to-let house will work as a great investment for you; it is vital to check some things. So, are you wondering What makes a good house for rent? I am going to discuss some specific criteria that I use to identify a great house in this article.
What makes a good rental house?
The following are the four main things to look for in a good house for rent. It is usually not easy to get one that meets these key factors, but you can find it with patient and hardwork. In fact, I shoot for twenty percent cash on cash returns on every deal using these criteria.
I consider location as the most important factor in obtaining a good house deal. The types of tenants your rental attracts, and how often you deal with vacancies depend on the quality of the neighborhood of your property. For an instance, if you consider investing in a buy-to-let house near a university, you may encounter vacancies on a regular basis, especially when student returns home for holidays.
Figuring out this before buying can help you to determine whether you can cope with seasonal fluctuations in vacancies. Furthermore, vacancy rates of a given location can help you to predict your success in attracting tenants. High vacancy rates will force you to lower your rental rates to snap up tenants while low rates allow you to raise them. What makes your rental house desirable will indeed differ with each prospective tenant. However, I have found the most desirable locations to be in close proximity to:
• Employment districts
• Top rated schools
• Entertainment, recreation, and shopping centers
• Good public transport links
• Green space
2. Cash flow
You must consider the cash flow before purchasing the rental house, and then do your sums. I never consider a house with no cash flow as a potential profitable investment. I always ensure that I can afford to maintain the mortgage repayment over the long term. I have seen some of my friends reselling their investment property after facing some financial stress.
A good house for rent should be quite inexpensive to keep and service the loan, once you own it. You should also expect things to get easier over time because you will be earning rent and getting a tax deduction. Purchasing a house that is already cash flowing guarantees future income, and possibility of finding renters.
3. Future Growth potential
Another important factor that helps me to define a good rental house is the future growth potential of its neighborhood. I will not hesitate to make rental investment in a location with growing employment opportunities. Such areas tend to attract more people, which mean more tenants. You can make use of local libraries or statistics from labor organisations learn how a particular area rates.
In addition, I am always keen to discover when new major companies move to an area because am rest assured that employers would flick to the area. Unluckily, house price tend to react quickly to this depending on the established corporation. So, you need to rush before the price curve get higher.
You definitely not want to have your property next to a hot spot for criminal activity. Before I decide to acquire a rental house in unfamiliar place, I prefer going to a public library or police for accurate crime statistics for that neighborhood, rather than inquiring from the homeowner who is eager to sell the house to me. So, you should never forget to look for items such as vandalism rates, recent activities, serious crimes and petty crimes.
Crime poses a threat to the residential stability of a location, and researchers associate this to housing value. Numerous studies relate violent crime to lower home prices as well as rental rates.
There is no doubt that rental houses are an awesome investment. However, you need to invest for cash flow and few vacancies, and account and leverage for all costs before buying it. I hope that the above factors will help you to avoid the mistakes many investors make. The most common ones include under estimating costs and overlying on appreciation as the only way to make profit.
What criteria do you use to identify a good house for rent when looking for one? Let me know by sharing your comments. Besides, you are free to share the article to make your good friends informed as well.
More tips about Hanoi property: http://alphahousing.vn/renting-guide/