Finding the Right Location
Some neighborhoods are too expensive for first-time buyers. You may get more rent for your unit, but unless you get a deal on a foreclosed property, expenses will be higher, too, including the down payment, closing costs, mortgage, and taxes. A deteriorating neighborhood where the value of housing is depreciating is costly, too. Although prices will be affordable for getting started, you'll have a hard time attracting good tenants and the property will be difficult to resell.
Once you find a likely duplex, check the zoning to make sure it's a legal duplex. (See Chapter 5.) Will there be noise problems because of traffic or airplanes? Are the gutters, curbs, and streets in good condition, and does the area, in general, seem to be free of crime? Is the property near a river that occasionally floods? If there is vacant property nearby, is it slated to be developed? What will be built and how might it affect you? These are all things to consider when you're thinking about getting rental property.
Housing and Areas to Avoid
Avoid abandoned duplexes with a lot of structural damage, boarded-up or missing windows, damaged ceilings, floors, and walls. Also watch out for vandalized plumbing and wiring; many vacant buildings are being stripped because the value of scrap metal has gone up enough to entice thieves to recycle.
Be on the lookout for, and stay away from, homes with rotted wood. Are the roof and the siding in good condition? If you find a mushy or wet board, how many more are there? Watch for areas where water may be seeping through and causing mildew or mold problems.
Beware of property in neighborhoods where yards are filled with junked cars and trash unless you see some homes where neighbors are making an effort to clean up the block. Take a good look at the other houses — are they run down or cared for? Is the city or community itself viable or are young people moving out in droves to find jobs elsewhere? Drive around the neighborhood at different times of the day to find out what's going on after school and at night. If you don't think you would feel comfortable living in a certain neighborhood, chances are your ideal tenant wouldn't either.
Where to Search
Look for good buys in stable neighborhoods or neighborhoods coming back after years of neglect. How can you tell if a neighborhood is getting better? Watch for signs that young adults and young families are moving into the area and fixing up homes. You'll see recently improved homes and yards intermingled with rundown property. The low prices of those neglected homes are attractive to young, energetic couples.
While a neighborhood is in transition, homes sell for less money and that makes them more affordable because of lower mortgage payments. Be certain, however, that the neighborhood is on the upswing and not going the other way. Get a report from the Chamber of Commerce. It will tell you about local businesses, industry, and jobs.
Are owners fixing up their property by painting, cleaning up yards, and putting in new landscaping? It's infectious. Their improvements and yours will spur others in the neighborhood to fix up their sites. As homes in the neighborhood improve, so will property values.
