How to Choose the Right Location for a Long-Term Rental Investment

For many real estate investors, long-term rental properties are the solid foundation for a great portfolio, providing consistent income and stable growth over time. An investment in rental property is often a smart decision, as these assets are not tied to the overall stock market and are more resistant to negative effects like inflation. The equity you build over time can also be useful for financing future real estate ventures. If you have been considering an investment in long-term rental property, you may be wondering how to ensure you are making a financially sound decision. Primarily, you will want to ensure you’ve selected a good property in a great location that will continue to grow in value. Want to learn more? Here’s how to choose the right location for a long-term rental property investment.

Understand Market Demand

To make educated investment decisions, you will need to have a solid understanding of demand in both the market you are looking to invest in and the real estate market at large. There are all sorts of factors that may affect demand at a local level such as shifting demographics, population growth, or a rapidly expanding job market. By taking the time to research various markets you may be able to identify better opportunities for an investment. It also helps to understand that real estate is cyclical by nature, with less demand in the winter months, and more in the winter.

Compare Rental Market Metrics

Before you make any investment decisions, it is important to compare the metrics of various potential markets so you can make the most informed choice. Along with the data points already mentioned, for rental properties you will also want to take a look at average vacancy rates and the direction rent prices are trending. However, make sure you are retrieving your information from reputable sources. You can find reliable data on real estate markets through aggregators like ATTOM Data, and services like reidealmaster.com. RCN Capital also works with market intelligence firm CJ Patrick Company to release an Investor Sentiment Survey every quarter. After you have gathered accurate data, you can begin the search for properties in the markets that are most likely to bring you a good return.

Evaluate Neighborhood Amenities

The location of a property plays a huge role in its profitability, especially when you consider how the amenities available determine housing demand. If a property is in a quiet neighborhood, with a reputable school system, and access to attractions like parks, shopping areas, and restaurants, you can be sure it will be highly desirable. Plus, a good area means better tenant retention, which can make managing your rental easier. However, both rent prices and property values will be elevated in these markets, so you’ll need to make sure the cap rates still make sense, and the property is cash flowing appropriately.

Consider School Districts and Education Quality

The quality of the schools in an area can have a major effect on property demand, particularly for family-oriented buyers. Generally, these areas will also be quieter and have other features geared towards children and families. You will want to look into the school districts for the areas you are looking to invest in, as this fairly hidden metric can play a big part in rental profitability. Consider using resources such as greatschools.org or Public School Review to get a better idea of the schools within an area.

Analyzing Economic and Employment Trends

Understanding economic trends in the markets you are considering investing in will allow you to utilize these trends to your advantage to boost your returns. For instance, if an area is experiencing a revival of industry it is likely that the job market will expand over time and there will be more demand for housing. Also, if there is new infrastructure in the works, or any other future developments planned for an area, this can be a signal that demand for housing will increase. A timely investment in one of these areas can lead to significant returns once developments are complete. Be sure to keep an eye out for these lucrative opportunities.

RCN Capital

The easiest way to save on rental property financing is to find a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Are you looking to purchase or refinance an investment property?