How to Choose a Rental Investment Property Montrose CO

Some real estate investors are interested in longer term investments as opposed to flipping investment properties. This could be in the form of a second home, or more likely—and affordably—a rental property. Here are a few tips, tricks and guidelines from a landlord and real estate investor who has invested both in short and long term real estate deals.

Risk tolerance

To begin, you’ll want to determine your risk tolerance. Investors who favor low risk and low returns would be well advised to stick to stable, middle-class neighborhoods that are already established. Those who are not averse to risk might favor lower-end neighborhoods that have a higher potential to shoot upward quickly, but also breed crime and may even deteriorate over time. For a humorous, irreverent look at slum landlording, see Diary of a Slumlord: A Lighter Look at the Darker Side of Real Estate ).

The safer route

Take a good, hard look at the local school systems of the neighborhoods you consider for investments, as they prove a consistent indicator of the quality of the community. Also examine the stability of the job market in that area, along with age demographics (families and seniors are the safest demographics). Most parents will sooner put their children in a good school than be fifteen minutes closer to work, and families are far more stable than young professionals.

The riskier (and potentially more lucrative) route

Speculation on low-end neighborhoods is a little harder because they haven’t yet taken off and you’re effectively trying to predict the future. When urban neighborhoods turn the proverbial corner, usually the first troops through the gate are the young professionals who are less worried about crime than families. Young professionals generally want to be close to the following: nightlife (bars, clubs, restaurants), artistic institutions (galleries, museums), water (bays, rivers, harbors), sports stadiums, and subways/metro stations (but NOT buses). Successful speculators would be wise to listen attentively to any municipal plans involving any of these attractions to a given neighborhood, but remember that there are thousands of other investors listening just as closely, so sometimes it pays to wait until after the initial excitement fades off—it’s the second mouse that gets the cheese.

One final word for speculators: Don’t over-improve. That neighborhood you’re watching may well take off in five years, but between now and then, you still have to rent to low income people. They can’t and won’t pay extra for a hot tub on the rooftop deck, so wait until the yuppies start their invasion before writing extra checks.

Developing monthly income

Some real estate investors are interested, not in a one-time payout (now or in ten years), but in creating a consistent, monthly income from their properties. So where does one start, on this journey from working as a wage s...

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