Evaluating a potential rental property is a process that should start with your investment goals. You can’t know if a particular home is a good rental investment unless you know what you’re hoping to accomplish. Do you want cash flow or is long-term appreciation more important? Are you going to rent the property out to long-term residents or short-term guests?

Once you’ve established your own investment goals, there are a few things you need to check off your list before you acquire a new piece of rental real estate. These factors will be important for almost all investors - regardless of the particulars you’re seeking.

Choose a Rental Investment in a Desirable Location

You already know that when it comes to real estate, location matters. It matters to the residents  who will rent your property, and that means it must matter to you. Most of the renters we work with in Sacramento are looking for a home that’s close to shopping, grocery stores, hospitals, schools, and highways. They want options for dining and recreation. 

Walkable neighborhoods are also popular with residents who are tired of driving and parking. An investment property that’s remote and difficult to access will not be a good deal for you. Buy something that’s not going to incur a long vacancy period. You’ll have to lower your rental amount to attract residents when your rental property isn’t well-located. 

Have a Professional Inspection Before You Buy

You’ve heard the expression “good bones.” That’s an important part of a good real estate investment. 

It’s often tempting to buy a fixer upper. After all, the price is usually attractive, and you can get excited about putting your own touches on the home. But, remember this isn’t a home you’re living in yourself. It’s a rental property, and you’re going to want to collect rent as soon as possible. Buying a home that isn’t in great condition means that you’ll have to sink a lot of resources into it and spend a lot of time fixing it up. You can’t afford that as an investor. 

Look for well-maintained property that is ready to rent right now. Have the home inspected thoroughly by a professional inspector and a local property manager in Sacramento. That will tell you if any repairs or updates will be needed before you list it on the Sacramento rental market. 

Calculate What You’re Likely to Earn

Location and condition are critical when you’re choosing an investment property. You also have to make sure it makes you some money. 

Take a look at what you’ll spend on it and what you can expect for rental income. Your property manager should be able to conduct a comparable market analysis that tells you what kind of rents you can expect. Compare this to the expenses you’ll face, including vacancy time, repairs, insurance, taxes, and management fees. Make sure you’re comfortable with the cash flow that you’ll earn. No one invests in property to lose money.