Buying Your First Rental Property? 5 Tips To Find A Profitable Unit

If you're planning to get into the landlord business, finding the right rental property is key to making money now and establishing a long-term income source. But, how can you know what's the right property to buy? Here are 5 key aspects of a profitable rental property.

Low Vacancies. A neighborhood with a lot of "for sale" or "for rent" signs is often a bad signal for rental property. Homeowners vacating the area or a large amount of renters as neighbors can mean a neighborhood in decline or problem spots. You can check out sales trends on your real estate agent's website itself and by driving around town yourself. 

Low Crime. Be sure to investigate local crime rates before buying a home in any neighborhood. While some petty crime is normal for just about any area, too much of it will drive away good renters, or any renters at all. Check on crime rates yourself by visiting the local library or city hall and asking about statistics on vandalism, petty crime, more serious activity, and recent trends up or down. 

Good Access. Access to amenities and work is key to appealing to quality renters. Your rental should often be easily accessible to the highway or freeway to attract commuters. Check around the neighborhood to determine how easy it is to access shopping, dining, evening entertainment, local parks, and grocery stores. Focus on amenities that are often appealing to the types of renters you want. 

Active Job Market. Most renters will need to work to earn money in order to pay the rent, so it's in your best interests to choose a rental property that's in a thriving economic area with job potential. You can often find economic data online about the city, county, or even neighborhood you're thinking about. Start with the Bureau of Labor Statistics (such as this breakdown of unemployment in the city of Denver), then get even more specific by talking with the local chamber of commerce, researching at the library, and checking city or county websites.

Development. While you don't generally want to buy a rental property right next to an industrial park or something equally as unattractive, you do want to find a unit in a growing neighborhood. The city planning department can usually help you locate information on what building permits are in place and future development on the horizon. A thriving community with new growth often has a good job market and is more attractive to young families with stable financial situations.

By looking for the right neighborhood characteristics and doing a little leg work now, you can help ensure that your new rental property is in the perfect spot to generate lots of great income for you for years to come.