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A 27-year-old realtor and landlord explains the 4 things to look for in a good investment property

3/15/2017

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Dana Bull and her husband bought their first home, a condo in Salem, Massachusetts, just nine months after graduating college.

But after deciding they wanted to be in Boston instead, where most of their friends were living at the time, they rented out the condo and used the income to cover rent and expenses in the city.

"[I]n our first two months of being landlords we had a mouse problem and one of the guys put a shot glass down the disposal, so we had our first taste of it [then]," Bull, now a realtor with Sotheby's International, told Business Insider.

"But ultimately, we were like 'You know, it's frustrating to have to deal with the maintenance and have this whole other thing that we have to worry about ... but it's a lot easier than our full-time jobs, which are extremely time-consuming and stressful ... so we started thinking, 'Hey, maybe there's something here,' and that was really where it all started."
​
Today, the couple earns passive income from their six homes and 18 apartments in Boston and the North Shore.

​Despite working in one of the most expensive rental markets in the world, Bull says there are four important things every investor should consider in a rental property, regardless of location.

​1. Projected income
If you're getting into real estate investing, you're probably hoping to get a nice return. But at the bare minimum, you want to cover that monthly mortgage payment. So how much rent should you plan on charging? Bull says she always goes by the 1% rule.
​
"Basically ... if you are buying a property for $400,000, your hope is to ultimately be able to get $4,000 a month in rent. So that's where you get that 1%. You're buying for $400,000 and your monthly income is $4,000," she said.

In some parts of the country, where property is less expensive and rents are higher, she says you may want to go by the 2% rule.

2. Current tenant situation
One of the first things to take note of at a potential investment property is the tenant situation. You don't want buy on a whim and get stuck in a nightmarish situation.

"What's going on ... Are they tenant at will? Are they under market? Do they pay? Get some clarity around that," she said. "Some of these properties, they get really bad in terms of hoarders and just mis-managed, bad situations. So try to wrap your head around what's going on there."

3. Overall condition
"It's impossible to find a perfect property," Bull says, so be aware of what needs fixing and whether you're prepared to shell out the money and time to get it done.

"A new roof? OK it's expensive, but it's not hard to do. It can be done in a matter of a week or two," she said. "Re-plumbing an entire house? That's a different story."

4. Utilities
If you're looking at multifamily property, like an apartment building or a duplex, you'll need to find out if the utility systems, like water and electric, are separate for each unit or lumped into one, she said.

You're in the clear if the systems are separate, but if they're not, then you'll likely have to pay to separate them or foot the bill every month for the whole building.

Source: businessinsider.com
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