6,000Units Under Management
Less Than 1% Eviction Rate
Avg. Time Rental Is on Market 23 Days

What to Look for When Buying a Rental Property

Updated 5/22/24 by Bay Property Management Group

Buying a rental property takes careful consideration and a lot of research. It’s also a significant investment, meaning you must have the right capital or financing plan to purchase it. With such a large investment, it’s important to know what to look for in a rental property and ensure you’re following the right steps to get it. In the video below, we’ll go over the best times to buy real estate, what to look for, and the steps to buying a rental property. 

Contents of This Article: 

When’s the Best Time to Buy a Rental Property?

Buying real estate is a decision that requires thoughtful research. Unfortunately, there’s no one-size-fits-all answer regarding the best time to buy a rental property. The best time to buy a rental property can look different for everyone, depending on various factors. 


For instance, you’ll want to determine whether it’s a buyer’s or seller’s market. In a buyer’s market, more properties are generally available, and prices may be lower. On the other hand, in a seller’s market, properties may be in high demand, leading to higher prices. However, rental demand may also be strong, making it a good time to invest in a rental property. 

Additionally, you’ll want to consider the economic conditions like interest rates, job growth, and the local economy. After all, low interest rates can make financing more affordable, while a stable job market can contribute to higher rental demand. 

Finally, you’ll want to consider your personal financial situation and investment goals. Look at your credit score, savings, and ability to secure financing. You’ll want to have a solid financial foundation before investing in real estate. Remember, real estate is usually a long-term investment, so your decision should align with your financial position and long-term goals. 

Don’t forget to also consider property management. Whether you plan on becoming a landlord or hiring property managers in Washington, DC, it’s crucial to account for these costs in your overall budget. 

What to Look for When Buying a Rental Property

Knowing what to look for is important to ensure a successful and profitable investment if you plan on buying a rental property. You’ll want to choose a property in a good location with the potential to appreciate and earn a steady rental income. Here are some factors to look at when buying a rental property. 


  • Location
  • Property Condition
  • Tenant Demand
  • Rental Rates
  • Potential Cash Flow
  • Property Taxes
  • Future Development Plans


The location of a rental property is probably the most important factor. If you plan on investing in a rental property, look for areas with low crime rates, good schools, access to public transportation, and proximity to amenities like shopping centers, parks, and hospitals. After all, a desirable location can attract quality tenants and contribute to the property’s long-term appreciation. 

Property Condition

Look at the overall condition of the property. You don’t want to invest in a money pit unless you plan on fixing it up before renting it out. So, consider the age of the building, the condition of the roof, plumbing, electrical systems, and any necessary repairs or renovations. Ultimately, a property in good condition may need less maintenance than a fixer-upper. 

Tenant Demand

Investing in an area with high demand is important to reduce the chances of vacancies. So, before buying a property, research the demand in the area. An increased demand usually means you’ll have an easier time finding and keeping tenants in your rental. However, an area with less-than-optimal demand can be hard to keep occupied. 

Rental Rates

Research the average rental rates in the neighborhood. Compare rates with similar properties to yours to ensure that your property’s rent is competitive and fair amongst comparable rentals. After all, setting the right rental rate is crucial for attracting tenants while ensuring profitability. 

Potential Cash Flow

Before investing in any property, it’s crucial to calculate the cash flow. You can do this by estimating the rental income and subtracting operating expenses, mortgage payments, property taxes, insurance, and potential vacancies. As you can see, there’s a lot to consider. However, positive cash flow is essential for the long-term success of your investment. 

Property Taxes

You’ll want to understand the property tax rates in the area. After all, high property taxes can significantly impact your overall return on investment. So, consider local tax laws and any potential changes that may affect your bottom line over time. 

Future Development Plans

Another important factor to consider is any planned developments or infrastructure projects nearby. Upcoming developments can positively influence property values and rental demand. However, on the other hand, negative developments might impact the location’s attractiveness. 

Steps to Buying a Rental Property

Investing in real estate takes a lot of time, effort, and starting capital. Knowing which steps to take to ensure a successful investment is important. Here are some of the crucial steps you’ll want to consider before investing in a rental property

  1. Research Market Trends- Research property values, rental rates, and local market factors.
  2. Determine Your Location- Identify a strategic location based on amenities, safety, and appreciation potential.
  3. Analyze Potential Deals- Evaluate listings and estimate rental income and appreciation.
  4. Find the Right Property- Narrow your options based on condition, location, and goals.
  5. Find Proper Financing- Secure financing aligned with your budget and goals.
  6. Make an Offer- Formally offer to purchase, negotiating terms like price and closing costs.
  7. Close the Deal- Complete all paperwork, coordinate with your lender, and finalize the purchase.
  8. Find Property Management- Choose self-management or hire a reputable company for tenant screening and maintenance tasks.

Pros and Cons of Buying a Rental Property

Buying a rental property can be a highly lucrative investment option. However, that’s not to say that there are no risks. Here are some of the main pros and cons to consider before investing in rental properties. 

Benefits of Buying Rental Properties

  • Steady Income- Rental properties can provide a steady stream of income through monthly rent payments.
  • Appreciation Potential- Real estate has the potential to appreciate over time, increasing the property’s value.
  • Tax Benefits- Investors can benefit from several tax advantages, including deductions for mortgage interest, operating expenses, and property depreciation.
  • Inflation Hedge- Rental properties are generally considered a hedge against inflation, as property values and rental income can increase with inflation.


  • Portfolio Diversification- If you want to diversify your investment portfolio, owning real estate can provide balance and stability.

Disadvantages of Rental Properties

  • Market Fluctuations- Real estate values can be affected by market fluctuations, economic downturns, or local factors beyond your control.
  • Risk of Vacancy- There’s a risk of vacancies, which can lead to less rental income for that month or period of months.
  • Financing Risks- If you finance the property with a loan, interest rates and terms can impact the overall cost of the investment.
  • Initial Capital Required- Purchasing a property requires a significant upfront investment, including a large down payment and closing costs.
  • Maintenance Costs- Property owners are responsible for maintenance and repair costs, which can be unpredictable and potentially costly.

Manage Your Investment Efficiently With BMG

Buying a rental property is no small feat. Successfully purchasing an investment property takes plenty of time, research, and starting capital. That’s why knowing what to look for when buying rental properties is important. Additionally, knowing the steps and pros and cons to get there can ensure a smooth and well-informed transaction. 

Need More Advice? contact us today!

If you’ve purchased a rental property and need help managing it, Bay Property Management Group can help! We understand how time-consuming it can be to market properties, find qualified tenants, perform maintenance, and collect rent. That’s why we provide comprehensive rental management services for properties in Baltimore, Philadelphia, Northern Virginia, and Washington, DC. Contact BMG today to learn more about how we can help manage your rental properties!