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What type of rental property makes the most money?

  • November 15, 2022
  • 424 views
  • 4 minute read
  • Meg Rivera
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In this article, we’ll highlight some of the things you should consider before purchasing an investment property if you want to make the most money in the long term. Of course, this will be affected by your present financial situation and the properties you can afford to purchase, as well as your short and long-term financial goals. 

To get an idea of how much rentals are going for in your neck of the woods, you can browse the listings on popular websites, like Rentola. Once you have purchased a property, this is also a great place to advertise your apartment or house and connect with potential tenants. 

It’s drummed into us again and again – the importance of purchasing a property in a neighborhood that is going to reap long-term financial rewards. Generally speaking, you want to find a property in an area that is highly sought after by renters and with a low vacancy rate (the percentage of properties that are unoccupied at a particular point in time). 

Suburbs that are close to universities and city centers will always be in high demand and will each attract different types of renters. Beachside neighborhoods are also incredibly popular and are highly sought after in the summer by short-term renters. 

Nearby amenities

Good public transportation links, leafy parks and gyms all add to the desirability of a suburb with renters, as do local cafes and restaurants. Most people will be happy to pay a little more in their monthly rent if it means having amenities and services right outside their front door. 

When looking at neighborhoods with great amenities, don’t only consider what is in existence but also any development plans for the future. 

Quality of local schools

If you’re looking at investing in a multi-bedroom residential home, then your target market will probably be families. As a result, the quality of local schools can impact how in-demand the property will be with renters and the price you can charge. It can also affect the overall value of your property and how much you will make when you decide to sell it. 

Job market and migration

If a large company or industry is about to move into an area, then that means workers looking for rental properties will follow. Consider what the local job market is currently like and any factors that could potentially impact it in the near future. 

The influx or outflux of people as they migrate to and from areas should also factor into your decision, as this will either decrease or increase the local vacancy rates. 

Crime rates

Even if you aren’t going to be living in the property, you don’t want to invest in an area that has frequent break-ins and vandalism (or worse). Yes, the price of the property may be cheap initially but it probably won’t generate a high rental income. Additionally, the quality of renters may be low, resulting in significant repairs to the residence at the end of each lease. 

Before investing in a rental property, check the local crime statistics and whether criminal activities are on the rise or fall. 

Property taxes

Property taxes will vary from area to area and are usually based on the current value of the residence. While it’s something that you should take into consideration before purchasing a property, apartments, and houses with high taxes shouldn’t necessarily be avoided altogether. 

If the property is in a sought-after neighborhood, then the taxes may be worth it for the rental income you will yield. That being said, you can also find properties with high taxes in neighborhoods that aren’t in demand and it’s these that should be avoided. 

Insurance and natural disasters

With the effects of climate change, predicting natural disasters is becoming trickier than ever. A flash flooding event, earthquake, or wildfire can cause significant damage to a property and it’s essential that you are insured against the worse. That being said, properties prone to damage due to natural disasters tend to be much more costly to insure, which is something you should factor into your decision.

Investing in a rental property for long-term financial gain

Unless you are purchasing a rental property without a mortgage, chances are the majority of the rental income you initially earn will go to mortgage repayments, property taxes, and the upkeep of the home. But in the long term (once you have paid off your mortgage), you will start to earn the kind of profit that makes rental investments worthwhile. 

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