I get asked quite a bit what I look for when I’m shopping for a rental property to buy. How do I know what I want or what qualities to be concerned with and which ones not to be? Here is my very basic list of things I think about when buying rentals.

Considerations for Buying a Rental Property

  • Source of the property. I’m immediately suspicious, especially in booming markets, of any property that has been on the MLS for more than a couple days. Inventory for investors is so thin in some markets, such as Atlanta and Houston, I guarantee if a property is listed, and especially if the price has been lowered, something is wrong with it.
  • Price. A house’s price says a lot about its condition and value. I don’t buy cheap because I don’t want the problems or risk that are more likely with cheaper properties. If an investment property is listed around market value, I don’t necessarily mind. It depends on what I’m getting for the money. This is more specific to turnkey rental properties.
  • Macro-market. What city do I buy in? I go for cities that offer cash flow plus appreciation potential. Cash flow is all that really matters, but if properties are similarly priced I want to go for the market that shows signs of impending growth. The good markets to buy in will always be changing. Phoenix used to be great, but the numbers there typically don’t work anymore. Atlanta took the reins after Phoenix and there are still deals there, but they are finishing out. Houston is taking Atlanta’s place now. Those are cities that are, or were, great for cash flow and appreciation potential. Cities in Ohio, Michigan, and Indiana for example, are great for cash flow but …read more