Eyeing a rental property purchase?
Consider the features your tenants will desire
By Erik J. Martin
If you’re no longer a renter, consider yourself lucky. Rental rates continue to skyrocket in many markets, as supply can’t keep up with demand and home prices remain out of reach for many dreaming of homeownership.
And therein lies an opportunity: Why not consider purchasing a rental property and capitalize on what could be a steady and profitable stream of rental income? This strategy could be your ticket to a golden nest egg that allows you to retire in comfort someday.
But before you jump on the landlord bandwagon, it’s important to give careful thought to more than just the right location for a rental property. The amenities built into your units will be a dealmaker or a dealbreaker for prospective tenants, research suggests.
A new report by ATTOM Data Solutions suggests that millennials – the key renter demographic you want to target – value particular features and attributes in a property. These include ample spaces for socializing with peeps, spacious living rooms and kitchens, and generous outdoor areas (like a balcony, porch, or deck). Gen Y is eager to lease greener properties that boost energy efficiency and eco-friendly materials, as well.
The report also indicates that, on average, the typical renter changes their rental property every six to 36 months.
“Every prospective landlord should closely evaluate the location, amenities and property details of any rental property they are considering,” says Marina Vaamonde, real estate investment specialist with HouseCashin in Houston. “With millennials moving at such high rates – every six months to three years – high vacancy rates are going to be one of the largest reasons for revenue loss. So making sure your prospective tenants have the amenities they value available to them, along with property details that fit into their lifestyle, is essential to keep your occupancy rate high.”
Vaamonde cautions that many landlords overlook or disregard what renters are looking for nowadays.
“They don’t want to invest additional money into the rental property or are oblivious to current market trends. Although landlords can sometimes get away with this because their property might be in an ideal location, they usually have a very hard time getting the property rented if it lacks in-demand attributes,” she adds.
Christopher Barrow, cofounder/broker for Kentfield, California-based Foundation Homes Property Management, seconds that analysis.
“Landlords often don’t see their own properties with the critical eye that tenant targets will. Staying on top of the trends and tapping into popular home features is one of the best ways to minimize vacancies and increase your long-term return on investment,” notes Barrow.
Jonathan Layne, an agent with Layne Realty Group in Bethesda, Maryland, says most of the desirable rental unit attributes identified by ATTOM Data Solutions are spot on.
“Millennial renters want large spaces to entertain and have friends over. They yearn for spacious open kitchens and family rooms and eliminating the need for a formal dining room,” says Layne. “I also believe that being eco-friendly is important to everyone, but not at the top of every renter’s priority list.”
Rick Albert, a broker associate with Los Angeles-located LAMERICA Real Estate, says if he were considering a single unit rental purchase (such as a house or condo), it would have to fit a strict set of criteria.
“I would look for a minimum of two bedrooms and two bathrooms. But you have to do your homework to learn if there is a demand for your type of property in your area. For example, there may not be a demand for homes with too many bedrooms in a given market,” Albert explains.
In Layne’s ideal unit for rental, “I would upgrade the kitchen with modern appliances and install hardwood floors throughout. Ideally, the unit should have a parking space and door security, too.”
Barrow, meanwhile, would invest in property offering at least three bedrooms and two baths in each unit.
“The property should have a flat yard – even if it’s small – that’s designed for outdoor living,” says Barrow. “I would also modernize the kitchen and bathrooms with durable materials and replace any carpeting with engineered wood flooring, which is also virtually pet proof.”
For best results, it pays to perform thorough due diligence on your chosen market and available rental properties.
“Sit down with an experienced realtor who can show you data as it pertains to target areas and properties that work best for you and amenities they should have,” suggests Layne.
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