You should know what to look for before buying an investment property in Omaha. To help identify the right investment, here are 5 things to research before making a purchase.
Investing in Omaha real estate may be one of the smartest financial decisions you ever make. Investing in the right property can produce tremendous returns for many years to come. But, we’ve heard from many investors that finding the right property can be difficult. More importantly, poor selection can impair your capacity for future investments. In this article, we will call five of the most important things to look for in your Omaha investment property.
Potential for Increased Rent
The ideal property (according to some), is a place that’s been poorly managed, has lagging rents and maintenance, and offers lots of room for improvement. If the property was just remodeled, rents are maxed out, and it will be years before you can raise prices, you’ll probably be paying top dollar and have little room for improvement. We all have different investing styles and some prefer to only buy a place that requires minimal effort. But, it’s worth considering if that will yield the best return. Sometime, a property might need only a few repairs and cosmetic improvements to increase the perceived value and achieve market rents–It could then be a real money maker. When looking for investment properties in Omaha, be sure to consider what the property could be, not just what it is today. It’s worth researching the properties that earn higher rents in the neighborhood and how much of a gap there is. Also, watch the trends of where people rent and what they pay. If you can buy at a lower price (lower taxes) and make a few improvements to bring up the desirability and rents, you will likely have a strong investment.
I alluded to this above, but is the property located in a sought after neighborhood? Look at the rental market in your neighborhood: what are the rents, configurations (any special amenities), number of bedrooms, availability (many or few listings), and length of listings (how long before a tenant is found). Of course, you’ll want your Omaha investment property to be in an area with demand, though you’ll need to consider the relationship of demand and price. Especially with multi-family units, it is best to work with private sellers to get the best prices. Sellers know what areas are in demand and will price accordingly. If an investor is selling a property in a hot area, be sure you know the reason why. They may be ready to move on or there may be surprise problems with the property.
Our first rental was a single-family home. It was a great home, but it wasn’t designed as a rental. That meant maintaining the yard was much harder than it needed to be, interior finishes were easily damaged, walls showed scratches, and the list went on. The last thing you want is a high-maintenance property (or high-maintenance tenants). Look for properties that are easy to maintain inside and out. Landscaping should be simple, and not require a ton of water to keep things alive. Most tenants don’t put in the same effort with a rental property as they would with a home of their own. It’s best to avoid anything that requires high-maintenance care.
Also, consider how well the property was maintained in the past. If prior owners or tenants skipped a lot of maintenance, that can add up to big problems in the future. The level of maintenance will give you insight into how hard future maintenance will be.
Some properties seem to keep tenants for a long time. Some tenants who plan to buy their own home, don’t want to give up a great rental. When you review the rent rolls (listing of current tenants), consider how well this property retains tenants. Then, ask why. Are they staying because they love their home or because the rents are too low?
It’s great to acquire a property filled with good tenants, but don’t let that become too large a factor in your evaluation. Renters move out and you’ll need to be able to find replacements within a reasonable amount of time. Balance the advantage of receiving rent from day one with the potential headaches of bad renters or hyper-depressed rents. If rents are particularly low, there is a great upside to raising rent over time (see first point above), but you may not be able to retain long term tenants at a higher rent rate. The key is to understand the unique why of this property, seller, and tenants.
It’s critical to understand any zoning restrictions and HOA rules before investing in Omaha. Finding out after the purchase that you won’t be able to make improvements can ruin your plans. There can also be HOA restrictions on renting or even qualifications on who you are able to rent to. A little due diligence will eliminate many headaches down the road.
Buying an investment property in Omaha is a great way to grow your portfolio. Just be sure to purchase based on the facts. Not every house will be a profitable rental, so you need to know the number that works for each property. On the other hand, there may be homes you wouldn’t dream of owning for yourself that become your most profitable investments. Ultimately, just keep an open mind when buying an investment property in Omaha!