Investing in Pocatello real estate is one good way to earn short-term rental income and long-term returns that lead to passive income and a diverse financial portfolio.
There are a lot of options when it comes to choosing a property. How do you know which one is best for you?
It comes down to your investment goals, which should be well-planned and written down. Evaluate each potential investment against what you’re hoping to accomplish with your real estate.
In general, this is a great time to invest. More people are renting than ever before, interest rates are low, and there’s a high demand for affordable, well-maintained rental homes. Here are some of the criteria we recommend you use when choosing a Pocatello rental property.
Location Matters: Evaluate the Pocatello Rental Market
Every investor understands the importance of location when it comes to real estate transactions. However, when we’re talking about rental property, location becomes even more important. Your tenants will want to be in a neighborhood with good schools. They’ll want to be close to shopping, dining, and entertainment. Properties that are more remote will not rent for as much as centrally located buildings.
Walkable neighborhoods are especially popular with tenants today. In the current market, tenants are working from home more. Many of them are even going to school online and spending more time at home. That means less time in the car and a lower tolerance for traffic and difficult parking. A good investment property right now will be easily accessible and in a walkable area.
Look for Well-Maintained Homes in Good Condition
Older and deteriorating buildings can be attractive because they often come with a lower price tag.
However, the strategy of buying, renovating, and re-selling properties is risky. It’s better to buy a property that has a solid structure and good foundation. Cosmetic repairs and updates are to be expected, however you don’t want to invest a lot of time and money renovating a property that needs a lot of work. If this is your investment strategy, you’ll need to have some great vendors and contractors lined up to make the repairs quickly. The longer you spend fixing up your rental units, the longer it takes to earn any money on them.
A good investment property is ready to rent right now. Have the home inspected thoroughly by a professional inspector and a local property manager. This will give you an idea of what you’ll have to do to get it ready for the rental market.
Look at Cash on Cash Return and Cap Rate Potential
You’re looking for the highest return on your Pocatello investment property, and that means cash on cash return and capitalization rate are going to be front and center when you’re evaluating potential investments. Estimate what you’re going to earn in rent by talking to an experienced property manager who knows the market, the rental values, and the real estate trends. Consider what you’ll be spending on taxes, insurance, property management fees, and mortgage payments. Factor in variable expenses such as vacancy, maintenance, and turnover.
A good investment won’t leave you playing catch-up in terms of what you earn and what you spend. Sometimes it will take a few months before you can start seeing positive cash flow. In Pocatello, you should be able to make the numbers work in your favor fairly quickly. If a potential property is leaving you in the negative cash flow territory, you may want to look for something else.
The One Percent Rule
Another way to quickly assess whether an investment property is worth considering is the one percent rule. With this rule, you’ll take the initial cost of the property, along with any repairs costs, and calculate 1%. If you’re unable to rent the property for this price in the current Pocatello rental market, there’s a good chance that the property wouldn’t be a good investment. This is a fast way to get an up or down vote on the homes you’re thinking about.
Ultimately, a good investment property earns you consistent rental income, attracts great tenants, and appreciates in value. When you can find a Pocatello investment home that fits those criteria and matches your investment goals, you shouldn’t hesitate to buy.
If you’d like some help, we have a lot of experience in this market. Contact our team at Jacob Grant Property Management.