How Do I Know A Good Investment Property When I See It? - Article Banner

Dayton is an attractive rental market for a lot of investors. Rents are on the rise, the local economy is strong, and home values are seeing dramatic increases. While the low inventory and high demand are driving home prices up, there are still plenty of affordable investment homes to be found. Good opportunities exist, but you have to know what you’re looking for. 

Buying the right rental property is the key to a successful and profitable investment experience.

How do you know if a Dayton property is a good investment? 

That’s going to depend on a number of things, starting with your own investment goals and whether or not prospective tenants will be drawn to the home you’re considering. 

While the right rental property acquisition will depend largely on why you’re investing and what you’re hoping to achieve, there are a number of things that will tell you right away whether you’re considering a profitable rental home. 

This is what you need to look for when you’re investing in Dayton real estate.

Pay Attention to Dayton Investment Property Condition

You can spot a good investment property by its condition and the amount of maintenance you expect it will require as you’re renting it out. 

Think about the work that needs to be done to initially prepare it for the rental market. Have a complete inspection before you close the deal, and make sure you’re willing (and able) to spend what you’ll need to spend in order to make the home habitable, safe, and attractive. 

You’ll also need to think about long-term planning. Is the roof old? Are the appliances deteriorating? How old is the home? 

A well-maintained property will attract stable, long-term renters. While it would be great to purchase an investment with some attention-grabbing features like granite counters, bamboo floors, and garden tubs in all the bathrooms, these things will not matter nearly as much as whether the foundation is strong, the plumbing is up to date, and the insulation is new. 

Your best investment property is probably not a fixer upper. For some investors, this is part of their investment plan. Maybe you’re hoping to buy cheap properties and then fix them up before you rent them out for top dollar. If that’s your goal, you’re going to intentionally look for those specific homes. But if it’s not your goal, and you’re more interested in getting a rental home to market quickly, focus on the homes that don’t need a lot of work right away. 

A lot of time and money will be spent renovating that house and not only do you have to consider how that impacts you financially, you also have to think about the delay in getting the home on the market. You won’t collect rent right away. It may take months. 

A well-maintained rental home that only needs some cosmetic upgrades is your best option when you’re looking for a good Dayton investment property. 

Is the Investment Property Going to Cash Flow?

You’re looking for a property that’s going to make you money. 

To choose the right rental investment, you’re going to need some kind of an idea about how much money you’ll earn in rent and how much the property is likely to appreciate in value over time. 

There are several different ways to do this math. 

When calculating your expected return on a property, most investors will use the 1 percent rule. This is a quick way to establish how much positive cash flow you’ll earn on a potential investment. Each month, you want to bring in no less than 1 percent of what you paid for the property. 

Let’s look at an example of how this would be calculated. Maybe you purchase a single-family home for $120,000 and invest $10,000 in renovations for a total initial investment of $130,000. As you’re estimating what you’re likely to earn on this property, you’d want a rental value that’s at least $1,300 per month, or 1 percent of what you’ve invested. 

With the right rental home, this is attainable. But it’s not the only way to estimate the value and the returns. 

You’re not always going to see strong returns right away, and that doesn’t necessarily mean it’s a bad investment. A lot of investors are more interested in long-term gains instead of immediate cash flow. 

Properties in Dayton, Ohio will see rising values and strong appreciation.

You’ll be able to charge more in rent when you upgrade the property. During each turnover period, you’re likely to put new paint on the walls. You might upgrade the floors and install new appliances. 

Think about how much your property will be worth when you are finally ready to sell in 10 or 20 years. That appreciation potential will tell you whether you’re making a strong investment. All land is going to appreciate a little bit over time, but you want an investment that will increase in value more than the rest. This goes back to property location. It also helps when you have preventative maintenance plans in place and you spend time and resources protecting the condition of your investment and growing its value.

Don’t Buy a Dayton Investment Property with Burdensome Expenses

You’ll know you’ve found a good investment property when you can be sure you’ll earn short-term income through rental payments and long-term returns through appreciation and increasing values. 

But there will also be expenses that you need to factor into your purchase. 

You’ll need some good budgeting in order to decide whether a particular property is right for you. Plan for marketing, maintenance, professional property management, vacancy, and other fixed and variable costs. 

Investors are not fortune tellers, and you cannot expect to anticipate every expense when you’re deciding whether or not to invest in a home. But you can budget accurately and set aside a reserve for any of those sudden surprises. 

When you’ve identified a potential opportunity, try to get an idea of what these fixed expenses will be:

  • Mortgage
  • Property taxes
  • Homeowner’s insurance
  • Property management fees 
  • HOA fees (if applicable)
  • Preventative services such as landscaping and pest control

Variable expenses will almost always be more challenging to predict. These will be: 

Don’t forget that you may run into really expensive situations like evictions. 

A good investment property will allow you to at least identify where the most of your money will be spent. 

Work with a Dayton Property Manager to Identify the Right Investment 

Work with ProfessionalsWorking with a team of experts is essential to choosing the right investment property. 

When you’re trying to decide if a particular asset would make a good and profitable investment as a rental home, don’t hesitate to reach out to a property manager. A local Dayton property management company that understands the local market can be an invaluable asset. 

You might be thinking that you won’t need a property management partner until you’ve already purchased an investment. Our expertise, presumably, will come in when it’s time to lease and manage and maintain the home. 

Don’t wait. If you contact a management professional before you buy, you can access our expertise and leverage our professional network and resources. 

Property managers can help you determine what you’re likely to earn in rent, whether repairs will be needed to make the home rent-ready, and how much you can expect to spend maintaining the home. They’ll know if it fits what tenants are looking for and how it will compete in a fast-moving market. 

Your property manager can even help with vendor and contractor referrals. They can introduce you to insurance agents, legal experts, and brokers. 

When you’re ready to invest in a Dayton rental property, please contact our team at ManCo Property Services. We’ll help you pick a winner.