In 2006, NASA admitted it had accidentally taped over the original recording of the first lunar landing.
In 1962, Decca Records had a choice to sign one of two bands. They chose Brian Poole and the Tremeloes. Which band did they reject? The Beatles. In 1788, the Austrian army accidentally attacked itself and lost 10,000 men.
Clearly, mistakes happen. The same will be true for your real estate business, though hopefully to a lesser extent than the examples above. But one mistake that can be fatal to your real estate business is choosing the wrong property. Picking the wrong property is a lot like picking the wrong spouse.
It can be incredibly stressful, expensive to get out of, and detrimental to your well being! But how do you know what the right property is? After all, there are a lot of properties out there. What should you buy? What should you avoid? Are four bedrooms better or worse than two bedrooms? What about garages? Neighbors? These are important questions you should be asking if you want to buy the right deal and have the most success as a landlord, so let’s examine several things I look for when shopping for a rental property.
Keep in mind, all of this depends heavily on the trends in your location. Furthermore, the following list is not a bunch of rules you must follow, but rather pieces of wisdom that I’ve picked up and have served me well.
It’s hard to get long-term tenants in a 1- or 2-bedroom house. Tenants who are single tend to choose a one-bedroom but quickly hook up with that cute guy/girl from work and then need a larger place. They move into a 2-bedroom and soon start having kids and again find they need more space.
Therefore, in my experience, 3- or 4-bedroom houses tend to make the best rentals because they attract long-term tenants, which cuts down your vacancy expenses. Furthermore, 3-bedroom houses are generally the best kind of property to sell, which can be great when that time comes. If you are looking for a multifamily property, 2-bedroom apartments are usually acceptable, and incredibly common. Single-bedroom and studio apartments are also common, but they tend to attract a more transient tenant, so expect more turnover in that style.
Also, understand that having more bedrooms is not always better. Once you get into 5-bedroom homes or higher, you’ll find the only tenants willing to rent them are families with a lot of kids. Now, I like kids as much as the next person, and I would never discriminate against them (that’s illegal, anyway!), but the truth is that having a lot of kids is hard on a property—broken windows, stained carpet, etc. Keeping a house to 3 bedrooms (maybe 4) is the best way to keep the kid count down legally.
The older the property you buy is, the more expensive it’s going to be to fix. I invest in a lot of older homes because they offer the best price…