Property Management Blog

A Guide on How to Find a Profitable Property Investment

Pinnacle Property Management - Tuesday, May 14, 2019

Finding rental properties with superior earning potential is one of the keys to be a successful landlord. A profitable rental property will cover the mortgage, property taxes, insurance, repair expenses as well as provide you with returns on your investment. 

That might sound like a tall order, but many property investors enjoy the benefits of their passive income thanks to having made the right selection in their investment property.

To be part of that group, keep on reading to know what the right steps are to take to find a profitable property in Torrance, CA. 

Here are a few to get you started on your investment journey to success. 

1. Look for a reputable real estate broker. 

If this is your first time purchasing a property or you simply lack the time (or patience) to deal with all the paperwork and searching yourself, then consider hiring a real estate agent or broker. 

The right hire can mean the difference between success and failure in your quest to find the right rental property for your needs. 

A good agent should know the area like the back of their hand. They can also tell you which property will meet your investment goals and budget. This is especially important if you are considering an out-of-state investment. 

Not all real estate agents are created equal, though. You should always do your research and a bit of a digital background check prior to hiring one. 

2. Go through your finances thoroughly. 

A real estate investment is a huge financial undertaking. It will require you to go through your finances and see whether they are in order or not. 

In particular, check your credit report. Does it contain any inaccuracies? 

Ideally, you should get copies of this report from all the three major credit reference bureaus – Equifax, Experian, and TransUnion. 

A good credit report can help you gain credit lines, better mortgage rates or even insurance. 

3. Don’t overpay your investment. 

Overpaying occurs when you pay an amount for a property that negates or significantly diminishes its actual value. 

It hurts your investment since there will be not much room for growth, limiting your earnings from the investment. 

So, when looking to buy a property, set for yourself a maximum amount that you can afford to spend, leaving you with some cushion should there be vacancies. 

4. Consider buying a rent-ready property. 

A rent-ready property may be a bit more expensive. On the bright side, it’ll be ready for occupation the moment you buy it. 

You might even find yourself collecting rent at the end of the first month. 

Some buyers, however, often make the mistake of buying a fixer upper. In many cases, the price is often the main attraction. 

But sooner or later, what seemed like a great deal may end up being a costly mistake if you lack the experience or the time to see the renovations and/or maintenance repairs through. 

5. Get your Torrance property inspected. 

Don’t make the mistake of buying a property without having it inspected. It can be a costly mistake. 

A good inspector can find any hidden issues that could end up costing you in the short and long term. 

A good inspector will make sure that the environment is safe for tenants, that the paint is not lead-based, and that the electrical wiring is up to code. 

While you may need to foot the inspection bill, it can certainly save you lots of money down the road in unexpected repairs. 

6. Know the neighborhood. 

Now that you have found a property that meets your conditions, the next step is to research the neighborhood. Remember, location is everything when it comes to your real estate investment. 

It can make the difference between a property that is struggling and one that is flourishing. 

What you should you check in a neighborhood?

The first thing you want to look at is the vacancy rate. Are there many vacant homes in the area? If there are, chances are yours will be, too. 

Another thing you want to look at is the crime rate. No one wants to live in a crime prone area. 

You also want to look out for the quality of schools in the area. For tenants with school-aged children, the school district is a major priority

7. Follow the 1% Rule. 

The 1% rule states that a rental property should rent for at least 1% of the purchase price to yield a positive cash flow. 

For example, a $200,000 house would need to rent for $2,000 per month to be profitable. 

If a property meets this rule, it means that it’ll take 100 months for the property to recoup its cost. That’s 8.3 years. 

8. Don’t forget about curb appeal.

Tenants don’t want to live somewhere they would be embarrassed to bring friends and family to, just like you wouldn’t want to live in an unattractive home. 

Prospective tenants may not even want to apply to occupy your property based on how it looks from the outside or in pictures. 

While it might seem trivial, decorative touches like painting your home or updating your landscaping can be the difference between an occupied or vacant rental unit. 

9. Look at the insurance rates. 

As important as they are, insurance rates cut into your profits. 

Make sure to stay away from properties with extra high rates if possible. A property located in a flood zone, for example, may require you to carry extra flood insurance. 

If possible, buy a property that doesn’t require extra insurance. If you’re not sure whether an extra insurance is mandatory or not, simply call your insurance representative. 

10. Invest in a neighborhood with job opportunities. 

The other indicator of a profitable investment property is the rate of job growth. The reasoning behind this is simple: people tend to follow jobs. 

Job board websites and local business news can help you in your research. 

These are the 10 crucial things that you should consider when looking to find a profitable rental property in Torrance, CA. 

Again, if you simply don’t have the time or lack the industry experience, then consider hiring professional help. 

Pinnacle Property Management
CA DRE # 01905815
22700 Crenshaw Blvd.
Torrance, CA 90505
Ph: (310) 530-0606
Fax: (310) 626-9786

We are open from 8:30am to 5:00pm M-F.

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