{"id":17509,"date":"2019-11-02T08:00:30","date_gmt":"2019-11-02T13:00:30","guid":{"rendered":"https:\/\/www.abodo.com\/blog\/?p=17509"},"modified":"2025-07-16T12:30:41","modified_gmt":"2025-07-16T17:30:41","slug":"rental-property-investment-guide","status":"publish","type":"post","link":"https:\/\/www.rentable.co\/blog\/rental-property-investment-guide\/","title":{"rendered":"2022 Guide to Your First Rental Property"},"content":{"rendered":"

Investing in a rental property<\/span> is a great way to generate some cash flow, and it can be the first step in building up a rich, diversified real estate portfolio. But it\u2019s important to find the right property for that initial investment. While investing in a rental property<\/a> can be one of the safest, most lucrative investments you can make, it does require careful research and planning. Buyers who make a few missteps can see their profit margins evaporating or, worse, find themselves on a short, brutal ride to foreclosure and bankruptcy.<\/span><\/p>\n

There are many ways to inflate your investment in real estate. You can buy and flip or <\/span>hold rental properties<\/span><\/a> until their value skyrocket. In flipping, you\u2019d need significant capital. But, in holding properties, you only need to wait for the right opportunity. If you’re considering entering the market, explore this guide on how to invest in vacation rentals<\/a> to make informed decisions.<\/span><\/p>\n

Fortunately, there are a few <\/span>simple rules<\/span> that investors can follow that will make their entry into the rental property game a lot smoother.<\/span><\/p>\n

Do Your Research<\/b><\/h2>\n

Buying property involves a lot more than just putting down money for the cost of the property. Completing the purchase isn\u2019t the end of your financial investment; it\u2019s the beginning.\u00a0<\/span><\/p>\n

A homeowner-slash-landlord is property management, all of which are significant, ongoing expenses on top of your mortgage payment.<\/span><\/p>\n

Property taxes<\/span><\/a> are usually billed once or twice a year; most property owners like to put money aside each month, so the tax bill doesn\u2019t sneak up on them. The <\/span>average annual homeowners insurance premium<\/span><\/a> is $1,200, but that number can be significantly higher in some states. Many property managers charge a portion of the rents<\/a> collected, so you have to include that into your calculations if you don\u2019t want to be driving down to your rental every time a tenant\u2019s sink is clogged. And speaking of clogged sinks, maintenance is a notoriously unpredictable expense, but if you\u2019re unlucky enough to have problems with things like the roof or the plumbing, you could be looking at a surprise bill in the five figures.<\/span><\/p>\n

Taken together, it\u2019s clear your mortgage payment will only be a portion of your total financial responsibility.<\/span><\/p>\n

When you want to dive deep into real estate, you need to know what you\u2019re getting into. This includes learning the jargon. Not knowing one thing can become a significant setback and may freeze your decision\u2013making capacity. Many terms come with crucial legal and financial implications. So, do your research and learn the trade so people will trust you and you won\u2019t be easily fooled. In addition, this will keep you from getting into trouble with the law.<\/span><\/p>\n

Potential Liabilities\u00a0<\/b><\/h3>\n

As someone considering investing in real estate, getting familiar with the legal challenges of owning and managing your first rental property is essential. One of them is the liabilities you might have to be held accountable for when someone has been injured on your property. This is where premise liability law comes into play. It involves claims arising from an injury sustained on another person\u2019s property.<\/span><\/p>\n

That said, property owners need to keep their premises as safe as possible to avoid facing premise liability claims on the ground of negligence. When someone is injured on another\u2019s property, they may recover compensation. For example, when a tenant is hurt in your rental property in an accident caused by your negligence, they may initiate a claim with the help of a dedicated <\/span>premises liability lawyer<\/span><\/a>.<\/span><\/p>\n

Due to this potential legal problem, you must call a lawyer to determine the possible legal liabilities you may incur as a rental property owner. They can provide valuable advice to minimize your risk of incurring liabilities as a rental property owner.<\/span><\/p>\n

The Benefits<\/b><\/h3>\n

Of course, there are benefits to owning a property too. You can reasonably expect your property to appreciate in value, and if you choose the right neighborhood, it can appreciate rapidly, allowing you to quickly build up equity. When you build up enough equity, you can access home equity loans and home equity lines of credit, which can make your ownership experience easier, or help you level up your investments.<\/span><\/p>\n

And there are <\/span>tax deductions<\/span><\/a> available to property owners, too. Smart owners make sure they take advantage of every financial incentive available to them, including investment property tax<\/a> benefits.<\/span><\/p>\n

Aside from tax benefits, owning a rental property can also be an excellent way of making money on the side. In short, it can be a great source of passive income for someone looking to invest in real estate.<\/span>\u00a0\u00a0<\/span><\/p>\n

So,<\/span> what\u2019s that saying – it takes money to make money? That\u2019s definitely the case with a rental property. But if you do you research before your investment, you can avoid being blindsided by the expenses, and you\u2019ll be able to take advantage of the benefits.<\/span><\/p>\n

Choose a Location<\/b><\/h2>\n

It\u2019s a cliche in the real estate world: location, location, location. But it also happens to be true. No single factor has more effect on a property\u2019s value than its location, so you\u2019ll want to choose carefully when you\u2019re looking at properties. Using a tool like Market Finder<\/a> makes it easier for you to analyze the most profitable neighborhoods in any city of your choice. Be informed and stay updated with highly accurate and relevant market data to make the best investment decisions and find your next Airbnb or a long-term investment opportunity.<\/span><\/p>\n

For example, neighborhoods near universities<\/a> are very easy to rent, but most students leave town for a quarter of the year, and they can be notoriously hard on properties. On the other hand, some traditionally residential neighborhoods have disincentives in place against rentals, so acquiring all the necessary permissions could take your investment into the red.<\/span><\/p>\n

First, you\u2019ll want to look at some fundamentals about the area. How are the local schools? High-quality schools often go hand-in-and with high property values and will make it easy to sell your property down the line.\u00a0<\/span><\/p>\n

How\u2019s the crime rate? Just as high-quality schools can predict high property values, a high crime rate is often correlated with low property values. And even if you\u2019re tempted by bargain properties in a high crime area, you\u2019ll likely struggle to attract and retain quality tenants. However, a moderate crime rate that\u2019s on a long-term decline can signal a good area for investment.<\/span><\/p>\n

A real estate property can be an excellent source of passive income. It can be rented out in the short or long term, which guarantees you monthly earnings.\u00a0 If the property is in a prized location, turning it into a bed and breakfast, or any similar business model, would be a great idea. That\u2019s sure money right there!<\/span><\/p>\n

Amenities and Job Market<\/b><\/h3>\n

On the positive side, look at the local amenities. If there\u2019s a lot of public transportation, public green space, and access to features like dining and nightlife, it will be easy to rent to <\/span>dependable tenants<\/span><\/a>, and you\u2019ll be able to ask higher rents.\u00a0<\/span><\/p>\n

If the area you\u2019re looking at is experiencing a lot of development and new construction, it\u2019s probably primed for a spike in property values. Projects like waterfronts, large parks, and arts districts can be especially good for the future of your investment.<\/span><\/p>\n

Finally, you\u2019ll want to look at the job market. If employment is strong in the area, you can assume there\u2019ll be a high demand for housing, which will steadily raise prices. <\/span>A highly industrialized location can be a great target for transient tenants, plus the turnover rate can be pretty quick.<\/span><\/p>\n

Once you\u2019ve taken all those factors into account, you\u2019ll want to look at landlord-specific factors like the vacancy rate and average rents. If the area has a high vacancy rate, it will be difficult to attract tenants, meaning you\u2019ll have to lower rents as an incentive. <\/span>Low rents<\/span><\/a> can bring in tenants fast, but they aren\u2019t good for your bottom line.<\/span><\/p>\n

And no matter how attractive an area might be in other areas, if the average rent can\u2019t cover the costs of your mortgage payment plus all the expenses detailed above, it won\u2019t be a prudent investment.<\/span><\/p>\n

Partner with a Top Agent<\/b><\/h2>\n

Here\u2019s the truth: partnering with a top agent will save you both time and money.\u00a0<\/span><\/p>\n

A real estate agent will save you time by taking you straight to the properties that fit your needs, so you won\u2019t have to waste months browsing. If they\u2019re experienced in rental properties, they\u2019ll be able to advise you on the full financial picture, as well as the local market\u2019s forecast. They\u2019ll also have an inside track on off-market properties<\/a> that are being offered. These are some of the best deals out there, and it\u2019s nearly impossible to access them without a well-networked agent.<\/span><\/p>\n

When you\u2019ve settled on a property, they can advise you on what kind of offers the seller is open to, and they can help negotiate the best possible price. A lot of buyers think they\u2019re able to negotiate the sale themselves, but they don\u2019t realize they\u2019ll be facing an experienced buyer\u2019s agent who\u2019s been through dozens or hundreds of deals. Having a seasoned agent negotiate for you is always going to get you a better deal than trying to do it yourself, and will save you several times more than <\/span>their commission<\/span><\/a>.<\/span><\/p>\n

Start Small\u00a0<\/b><\/h2>\n

Don\u2019t get too ambitious right out of the gate, and start looking at eight-unit apartment buildings. If this is your first rental investment, consider single-family homes or condominiums. Although condos appreciate at a lower rate than single-family homes, they\u2019re much lower maintenance, since the condo association generally handles everything outside the unit\u2019s interior.<\/span><\/p>\n

On the other hand, single-family homes are a great way to attract stable, long-term renters. They also have the best potential for appreciation, if you select carefully. Once you\u2019ve narrowed it down to your target neighborhood, you\u2019ll want to look for properties that could fetch higher rents after minor, cosmetic renovations.\u00a0If you\u2019re hoping for a quick sale down the line, properties that appeal to cash buyers like Ontario Property Buyers<\/a> can also be a smart choice<\/span><\/p>\n

Also, keep in mind that many properties sell below their asking price, so when you\u2019re looking, make sure you look at some properties that are technically out of your price range. This is an area where an agent could be a valuable advisor. They should have a good idea of the \u201creal\u201d market price in the area, and how motivated the seller might be. And if they know you have a hard upper price limit, they can try to negotiate with that number.<\/span><\/p>\n

Once you\u2019ve settled on a property, make sure it passes some general rules for good rentals. One recommendation is that you should pay no more than 12 times the annual rent you expect to collect. So, for example, if you anticipate charging $1,000 a month in rent for a property, that\u2019s $12,000 annually, meaning you shouldn\u2019t pay more than $144,000.<\/span><\/p>\n

Another similar rule is the 1% rule; basically, it suggests that your projected rent on a property should be around 1% of the purchase price. Therefore, a $250,000 property should fetch at least $2.500 a month in rent. If it\u2019s below that threshold, you may want to reconsider.<\/span><\/p>\n

And remember, if you don’t understand the rental investment world, start by reading a guide to terminology like this one<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Investing in a rental property is a great way to generate some cash flow, and it can be the first step in building up a rich, diversified real estate portfolio. But it\u2019s important to find … <\/p>\n

Read more<\/a><\/p>\n","protected":false},"author":23,"featured_media":17791,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[148],"tags":[455,457,456],"_links":{"self":[{"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/posts\/17509"}],"collection":[{"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/users\/23"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/comments?post=17509"}],"version-history":[{"count":21,"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/posts\/17509\/revisions"}],"predecessor-version":[{"id":21508,"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/posts\/17509\/revisions\/21508"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/media\/17791"}],"wp:attachment":[{"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/media?parent=17509"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/categories?post=17509"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rentable.co\/blog\/wp-json\/wp\/v2\/tags?post=17509"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}