What Makes a Neighborhood Ideal for Rental Properties

You can purchase rental properties almost anywhere, but your choice of neighborhood has a massive impact on your eventual success. If you buy a property in a good neighborhood for a good price, you’ll be much more likely to make consistent revenue and remain profitable – and conversely, if you buy a property in a bad neighborhood, there may be nothing you can do to save it.

The question then becomes, what makes a neighborhood ideal for rental properties? What factors should you be looking for when scouting different neighborhoods?

Working With a Rental Properties Management Company

Professionals in the property management industry can help you answer this question easily. Property managers are usually intimately familiar with many different neighborhoods around a given city, and sometimes, in metropolitan areas all around the country. Together, you and your property managers can gather information about various neighborhoods and help ultimately make a better property purchasing decision.

Better yet, once you add more properties to your portfolio, you’ll have a partner who can help you manage them. Property managers provide services like property marketing, tenant screening, rent collection, property maintenance, and more. You don’t have to do all your rental property scouting and management on your own.

But if you choose to go it alone, there are many variables you’ll need to evaluate.

Schools

One of the first things parents look at when shopping for a rental property is the nearby school district. For people with kids, school is the highest priority; if you live in a good school district, with excellent performance records, you’ll have a much better chance of finding willing tenants. Additionally, better schools attract more responsible people, helping the neighborhood flourish.

Crime

Crime rates aren’t perfect as a measure of safety, but they are a top concern for many tenants. If the neighborhood has high crime rates, and especially if those crime rates are violent, it’s going to scare people away. Conversely, the safer a neighborhood is, the more valuable its properties are going to be. Nobody wants to live in a place where they fear for their safety.

Employment

You’ll see lower vacancy rates in areas that have ample opportunities for employment. If there are large employers in the area, such as factories that employ thousands of workers, you should have no trouble finding people to fill your properties. Corporate and industrial development is also good for the economic development of a given area.

Aesthetics

Some people only want to live in a neighborhood that’s truly beautiful. If the roads haven’t been paved in years, if the sidewalks are cracked and broken, and if the houses look dilapidated, it’s going to turn people off. Accordingly, you should consider the aesthetic value of any neighborhood that interests you. Some of the aesthetic factors will be in your control, but others will be entirely dependent on external parties.

Art and Culture

Arts districts and other cultural hubs make for excellent property management territory. These flourishing life centers of metropolitan areas attract hipsters, artists, and other “cool” people.

Eventually, these people collectively beautify the area and increase external interest, driving more people to live, work, and enjoy themselves there. It takes some time to develop, but the increased demand leads to more valuable properties and more opportunities to rent.

Prices and Values

You’ll need to think about the prices and values of a given area as well. If properties in a given neighborhood are disproportionately inexpensive, it could make up for negative variables and other categories. Conversely, it’s possible to be priced out of a neighborhood that would otherwise be absolutely ideal for renters.

Positive Signs for the Future

It’s also important to remember that your property investments aren’t just an investment for today; you need to think about how they’re going to perform over the next several years and decades. Because of this, it’s important to consider how the neighborhood is developing and where it’s likely to go in the future. There’s no way to reliably predict exactly how a neighborhood is going to develop, but you can look for positive or negative signs for the future. For example, if the area is attracting more restaurants and entrepreneurs, if rental prices have steadily increased, and if there are recently announced plans for new employers to move in soon, you can rest assured that the neighborhood is on an upward trajectory.

There’s no such thing as a perfect neighborhood, and it’s possible to find amazing deals in otherwise bad or questionable neighborhoods. But for the most part, rental property managers and real estate investors see much better results when they choose the right neighborhoods from the outset.

Research your prospective neighborhoods carefully and only invest in the most promising opportunities.

Adam is a proud American citizen, entrepreneur, 2x founder, father of 2, and married. He considers himself a Constitutional Conservative and loves to golf and read books when he’s not running his businesses and writing content.