A great rental property depends on both tangible and intangible characteristics. Each investor will have his or her preferences and criteria for what constitutes a great rental property, but there are a few universal characteristics everyone can agree upon. Here are some ways to turn your investment into a great rental property in Hamilton.
This is the #1 thing that most investors don’t consider when starting out (including myself). The numbers on a cheaper house look great on a spreadsheet, but we often overlook the intangible impact of what having a house in a not so great neighborhood will bring along with it. Having a rental property in a great location means you will have plenty of quality tenants to choose from. Your property will most likely always have a high demand, and you should experience low to no vacancy rates. To be safe, of course, you will still need to factor in the suggested vacancy rate to your rental proforma (we typically use 5-8% for Hamilton which we feel is conservative for good locations). Great rental properties are usually near amenities, shopping, or entertainment, but in Hamilton there are many neighborhoods that have a high demand just because they are nice and quiet. One of our criteria for location that will be different for everyone, but I always ask myself: “Would I feel comfortable having my wife go to this house at night to look at a maintenance issue”? Typically the feeling in your stomach will tell you if you should move forward or not.
Cash Flow & Growth Potential
A great rental property will have a positive cash flow from day 1 and every month after (when averaged over a year). You also want to look for characteristics that will inform you on the amount of expenses you should expect. For example a house with a boiler will have higher maintenance & CAPEX expenses than a typical furnace. Your rental property will also be great if it has growth potential, but that ties back into location and some of the others we’ll talk about shortly. If it is in a great location and demand is high, you will be able to justify raising the rent especially during turnover when you have tenants lining up to move in. Make sure you keep an eye on the Hamilton market rental rate by using Zillow, Rentometer, and checking similar listings on Craigslist. If you mark your rent too high, you may deter some tenants or get tenants who won’t stay long.
Your investment strategy will determine the condition of properties you’re willing to buy. For example if you have more time than money, you might be willing to take on a full gut job, while the person with a lot of money, but no time would look for something more rent ready when they initially buy. Either way, tenants in Hamilton are willing to pay for clean, quality properties. Also, keep in mind, the better the condition of the property, the fewer repairs that will need to be made, and less likely the tenants will take it for granted. In general, they will work to keep the property in great shape for you!
A great rental property takes great property management! You may want to consider hiring a property management company to turn your investment into a great rental property. For help selecting a great property manager in Hamilton or OH, give Bridgelight Properties a call at (513) 438-0200 to discuss your needs and intended level of involvement. You want to make sure you maintain the integrity of the structure and surrounding yards, all major appliances, and HVAC systems.
A great rental property will be valued at more than you paid for it! In order for this to happen, you may have to purchase your rental as a distressed property and put some money into it. If it’s in the right location with the right demand, your property value should slowly rise and make for a great profit in the future! Most of Hamilton isn’t an extremely fast appreciating market like a New York or California, but certain neighborhoods do much better than others. Just make sure you hang on to it for more than a year, the longer the better for reduced capital gain taxes. When this happens, it could be a great exit strategy depending what you’re long term goals are.
It is important to keep an eye on market trends for your rental property in Hamilton. You want to make sure your rental is keeping up with the rental rates and property values. I buy a lot of houses in Hamilton from landlords who don’t keep up with market rates and are still charging their tenants what they paid 5 or even 10 years ago! We don’t jack rent up all the time, but you have to keep in line with market trends. This will help your property produce great results and outperform traditional investments in the long run. Keeping an eye on market trends might also help signal to you when a good time to exit is, if you foresee some bad times ahead.