Tips for Ensuring a Successful Rental Property Investment


Tips for Ensuring a Successful Rental Property Investment

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Investing in a good rental property can bring in a considerable amount of passive income. Getting your hands on the right property in the right area may even generate enough income to enable you to quit your job. Still, this isn’t to say that every rental property represents a wise investment, and purchasing the wrong property stands to drain your finances rather than add to them. So, if you’ll soon be seeking out your first rental property, take care to put the following tips to good use.

Study Up on Local Housing Demand

Before proceeding to invest in a rental property, you’ll need to study up on local housing demand. If the area in question has strong growth rates and ample demand for housing, there’s a good chance that a rental property is an investment that will pay off. Conversely, if the area has declining growth rates and waning demand for housing, a rental property is likely to have trouble generating the desired returns. Regardless of how much a certain property has to offer, it’s unlikely to turn a profit in an area with little to no demand. And if you don’t stand to make a profit, why invest in rental property? This is among the reasons you should limit your scope to profitable areas when seeking out rental properties that will generate sizable ROIs.   

Insist on a Pre-Purchase Inspection

Most of the rental properties you come across are going to be far from problem-free. While some properties are home to larger issues than others, big problems aren’t always readily apparent, even to the property owners. So, no matter how immaculate a property seems, you should always insist on a pre-purchase inspection.

From an investor’s perspective, pre-purchase inspections have no conceivable downside. Not only will a thorough inspection carried out by a certified professional uncover any hard-to-spot problems, the results of the inspection stand to provide buyers with enhanced bargaining power. After all, if a professional inspection uncovers a litany of pressing issues, you’re well within your rights to request that the asking price be reduced to reflect this fact. At the very least, the cost of necessary repairs and/or renovations should be deducted from the seller’s asking price.

Thoroughly Screen Prospective Renters

Tenants who are unwilling or unable to keep up with rent are among the biggest impediments to a rental property’s profitability. That being the case, it pays to exercise discernment when reviewing applications from prospective renters. So, regardless of how eager you are to find tenants for a property, you should never forgo the screening process.

Far too many property owners go with their gut when it comes to possible tenants. As long as someone is able to present themselves well over the phone and/or in person, these individuals assume that they’ll make reliable tenants and engage in little to no screening. Unsurprisingly, property owners often wind up regretting this decision. Furthermore, depending on where you’re based, you may find evicting tenants for non-payment of rent to be a lengthy and complex process.

When screening potential renters, take care to look into their credit score, employment situation and criminal history – with their permission, of course. Consistent income is of particular import, as an applicant should have a monthly salary that’s at least thrice the cost of rent. Of course, if someone has a good credit history and decent income, you may be safe in waiving the aforementioned salary requirement.

Similarly, a criminal history shouldn’t necessarily preclude someone from being able to rent from you. However, if they’ve been convicted of crimes that could potentially cause harm to other tenants or the property, you should think long and hard before giving them the go-ahead to move in.


All passive income seekers would do well to consider investing in rental properties. While not for everyone, rental property ownership can prove extremely lucrative under the right circumstances. However, this shouldn’t be taken to mean that every rental property you come across is guaranteed to generate a profit. In fact, if you’re not careful, such an investment may wind up costing you a lot more than it stands to make you. In the interest of preventing such an outcome, heed the pointers outlined above.

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