Your Investment in Rental Property - How to Pick a Fat Cash Cow

How can you tell if the rental property that you have been eyeing is a winning investment or complete waste of money? Read on and learn how to spot a profitable rental property before you fork out that down payment.

Watch out for Major Property Booms and Busts in Your Area

While it's impossible to predict the exact movements in swings and property trends, you should always be aware of the current market situation. This means knowing if the housing market is stuck in a depression or riding on top of a boom.

Just like all businesses and investments, you should always aim to buy low and sell high.

When there is a real estate slump, property prices will hit rock bottom and most people will be desperate to get rid of their properties. This present a golden buying opportunity for your long term investment in rental property so act swiftly to lock in any outstanding bargains.

On the other hand, you also have to avoid the temptation of buying rental property at the peak of a real estate boom. You not only run the risk of overpaying for a hyped up property but also suffer from sky high mortgage rates.

Shop Around the Area and Compare Prices Before You Buy

Ask any experienced rental property investor and they will tell you one of the most important things you should do is to take your time and shop around for the perfect cash cow with a positive cash flow.

How do you do know if that promising rental property you have been eying is going for a great bargain or is ridiculously overpriced? The answer is actually very straight forward - Compare the prices of similar rental properties in the same neighborhood.

Whether you are hunting for your perfect investment in rental property online or offline, it's important to compare apples to apples and pears to pears. The rental properties that you are comparing should ideally be of similar type and size.

As property prices are always see-sawing, you should always try to grab hold of the most recent sale prices for a more updated and accurate estimate. For this purpose, property sale prices in the latest 3 months will be the most helpful.

Hire Someone to Inspect Your Rental Property Before You Buy

It's highly recommended that you have your investment in rental property professionally inspected by a licensed contractor or home inspector before you foot the down payment.

There are 2 powerful reasons for doing so. Firstly you can avoid any nasty surprises later on because some type of damages such as termite infestation and water damage are very hard to detect with an untrained eye.

Your licensed contractor can also give you a more accurate estimate of the repair bills that you will have to fork out to bring your rental property to a rental condition. This is actually more crucial than most people think because studies have shown even experienced rental property owners tend to underestimate their repairs costs.

Teo Zhenjie has been showing landlords how to manage their tenants and rental property effectively on Propertydo Landlord Guides. Visit his website for step-by-step real estate guides, free resources and forms.