Is buying a rental in a hot area a good idea?
Every time I hear someone say real estate is all about location I secretly cringe. Here’s why—I know how hard it is to find quality tenants but it is way more difficult to find quality long-term tenants.
With the rental market booming and a whole new fresh crop of twenty-somethings looking to rent their first place, landlords often fall into the trap of the buying income property in trendy areas.
Now please don’t misunderstand—buying income property in trendy areas can a great strategy— but it doesn’t often lead to longer-term renters. Please realize a coat of bright paint, on an adorable property, in the hippest neighborhood will not equal a three year lease.
It just won’t. The likelihood that a “young, trendy, urban professional” is ready to settle down is slim. Think about it this way, their lives will change constantly. They graduate from college, take new jobs; they are willing to move great lengths for their big break. Some decide to move in with or break up with significant others. They look for travel opportunities in faraway places.
And when they finally decide to settle down, they might get married, have children and buy their first homes. So the trend, in these areas with their typical demographics, leads to an increase in the level of tenant turnover.
So what’s the positive in renting in hip areas? What do I do if that’s my strategy? How do I handle turnover and what’s the takeway here?
Good questions to ask before you buy a rental in a trendy area
- Hip areas mean high rent. You have some of the most desired real estate in the area and you can (and should) take advantage of that.
- If your rental strategy is to be a hipster landlord then own it. Run comps and get competitive with other properties. But be prepared to have firm rental processes in place for onboarding and turnover.
- Turnover is natural for all landlords. But successful landlords don’t have to wait long to fill empty rentals because they treat their current tenants well and often get referrals. So be a good landlord. Get to know your tenants and don’t be afraid to ask for recommendations.
- The takeway—be well educated and use the best strategy for you and your property. You can’t go wrong.
Check out these other great articles:
- Free Rental Agreements | Turnover Checklist
- Renters abound 10 million more on the way
- Pinch Pennies and Crush Goodwill
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