Three Signals to Invest in Rental Properties
Beginning real estate investors often overlook the potential investment return that can be generated from rental properties. In search of a big pay off quick, the fundamentals of investment are forgotten. In cities like Chester, PA, an investor can generate significant income from rental properties. Chester, the largest community in Delaware County, has an abundance of low-priced houses and is in close proximity to public transportation within the county and to neighboring Philadelphia and Wilmington, Delaware.
As with any investment option, your return on your investment will vary with the degree of risk you are willing to take. Here are a few tips to evaluate whether a particular area has the potential for an inventory of good income-generating properties.
- There is an oversupply of active listings for sale. In Chester, you will find an abundance of homes sitting on the market. The reason that these homes linger on the market is the lack of qualified buyers who have the means to buy these properties. As these houses sit on the market, investors realize little or no appreciation in value. In some cases, a depreciation in value may occur. With some exceptions, we do not recommend investing in single-family home for resale or appreciation in this kind of market.
- Demand for rental properties is high. With the aid of city government programs, cities like Chester have more people looking for rental units than are available for leasing. The demand and the number of units available in the neighborhood also gives an indication of the probability of collecting rent.
- You must properly assess the risk of the individual investment property. Even when the overall economics looks good, the range of risk could still vary. The assistance of a knowledgeable real estate agent who has experience with rental properties in the market can greatly reduce your capital outlay. The key factors that will influence the value of your rental properties are: 1) The quality of the neighborhood, and (2) the durability of the property (an older house may require more maintenance than a newer one).
After you consider these three factors, you can make an informed decision about the risk-reward trade-off that you will face. If you make an investment in Chester city property, your risk may be high but so is the expectation for a high return on your investment. As always, there is the time to buy. And, that time is now.