If you want to invest in a rental property, your motivation may partially stem from the sheer number of people who need a rental to live in. According to the Joint Center for Housing Studies of Harvard University, 43 million people in the U.S. rented their home in 2017.
Part of making a profitable investment in rental property involves choosing a beneficial location. Here are some factors to consider when choosing a rental property in a location that will provide long-term returns.
1. The property’s appreciation potential
The location of your rental property can greatly impact how much it appreciates in value over the years. Look for growth indicators that signal the area will develop over time, such as high employment rights, planned development projects, high average household income and the development of new transportation systems.
2. The location’s seasonality
Your rental property’s performance may vary greatly from season to season. For example, if you purchase a summer vacation rental, plan on having high demand in the summer months and lower demand as you move into winter. Although you may still find renters, you may have to adjust your monthly rate based on need during different seasons.
3. The tenants’ needs
Your rental property’s location will determine who ends up renting from you. If, for example, you want to rent to families, you may want to invest in an established neighborhood with larger homes. Or, if you prefer to rent to a younger demographic, consider purchasing an investment property near a college campus.