The Investor’s Guide to Rental Property Features (& How They’ll Affect Your Profits)

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Time to shop for a rental property. Where do you start? What kind of property do you want? Seems like there wouldn’t be that many options out there, but guess what? There are! Okay, well relatively, maybe there aren’t a ton, but there are enough to be confusing if you are just starting out. With all of them being considerations anytime you are shopping for a rental property, the options can start feeling a little bit overwhelming.

So here’s a basic breakdown of everything you may want to consider…. considering. First I will break down all of the things that you should be aware of and look at, and then I will revisit them in the context of figuring out which way to go on each of them.

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Characteristics of Rental Properties

You’d think a rental property would be just a simple property, but nope, they aren’t that simple! Here is an extensive list of all of the characteristics that can make up a rental property, in no particular order, with some more important than others:


Typically, the older a property, the more you will spend in maintenance expenses. The newer a property, typically the lower the maintenance expenses.

However, a new house is not always guaranteed to have lower maintenance costs than older homes. Some newer homes are poorly constructed, whereas a lot of older homes are built incredibly well and sturdily. If a home is older, a thorough knowledge of how much of it has been renovated (including wiring and plumbing) and the lifespans of things like the roof need to be known and confirmed.

Related: Newbies: Before You Buy Property, Gauge Your Rental Rates. Here’s How.


The condition of a property you buy is one of the most critical factors you should consider. The main reason you should consider it very strongly is because a property that ends up needing a lot of work can absolutely drain any profit you may have otherwise pocketed. That is not to say you shouldn’t go buy a beater property that needs a ton of work, but if you do, be sure you account for that level of expense in your profit calculations.

In addition to the financial side of a property’s condition, the other factor is effort. Don’t accidentally get into a high-maintenance property, not realizing how much effort and time it is going to require on your part. If you don’t want to be that involved in your property, be sure you are buying a higher-quality property (even if you have to pay more for it!).


Square footage and bedrooms are usually most important when it comes to looking at size. This characteristic isn’t as critical as some of the others, but the size of a property can make a difference in its rentability and resale potential. For instance, a 3-bedroom property is going to rent to a very different type of tenant (most likely) than a 1-bedroom property. Same with bathrooms — the number of bathrooms can make a difference too. Square footage — and what to prefer when it comes to it — really just varies.


Location is a biggie, for several reasons: safety, desirability, vacancy rates, resale ability, appreciation potential, tenant quality, price, and price-to-rent ratios. Each one of these issues that can be directly related to location can directly impact your bottom-line profit.


This matters for two reasons: 1. how much you can afford and 2. the returns on your investment. How much you can afford is obvious (and knowing whether you can get financing or not makes a difference there too). The returns depend on if you are gauging cash flow or appreciation. The purchase price can’t be so high that the rent collected doesn’t leave margin after expenses for profit.

Rental Income

For cash flow, the rental income works in conjunction with the price in that the rental income needs to be high enough to cover the purchase price of the property, as well as all of the expenses of the property. The price of a property is irrelevant if the rents aren’t high enough. “Price-to-rent ratio” is the term you’ll want to know here. How much does a property cost versus how much it brings in? That ratio is a major consideration (assuming you care about cash flow).


That price-to-rent ratio actually won’t matter a bit if the expenses on the property are so high that it washes out said rental income. So your first step is to make sure the price-to-rent ratio makes sense for the area and type of property you are looking at, but then confirm all of the expenses and make sure they won’t be too high to allow for cash flow.

Do NOT estimate expenses when you don’t have to! If an expense can be determined, don’t just guess using a percentage or something because your estimations could be detrimentally off. Things like taxes and insurance, as well as HOAs vary with every property and every location, so find out the definite amount to use in your calculations.

Classification (Residential or Commercial)

This mostly matters for financing purposes, but depending on how far into the commercial spectrum you get, you may need to consider a completely different method of operation than if you buy residential (4 units or less) properties, with things such as property management.

Appreciation Potential

This one especially matters if you are buying a property in hopes of appreciation (duh). If major appreciation is the name of your game, buy a property in Los Angeles, but don’t buy one in Indianapolis. If your primary focus, however, is cash flow, then focus first on the characteristics that will allow you to cash flow (price, rents, expenses), and then take into consideration things that may help you out with appreciation later on –location (city/market), size, desirability, condition, etc.


This one is more minor, but a lot of investors won’t buy a property that has a pool, believe it or not. One of the main reasons being safety — they don’t want the liability of someone drowning. Another is maintenance, and one more is resale. Oftentimes properties with pools can be tougher to sell.

Septic or Sewer

This one matters mostly in terms of expense. You may not experience a major expense with either, but do some major research if you find out the property is on a septic tank because having to replace those can be insanely costly. For sewers, just know how much the monthly cost is (and ensure it’s actually hooked up! That can cost quite a bit if it’s not).

How to Decide on the Characteristics

Now you know all of the things that should be considered, or known, about any one rental property. But how do you know when you are looking at each one how to decide what you want? I’m not going to go into major detail with this, but I’m going to give you a brief rundown of what each characteristic impacts, or potentially impacts.

Related: The Investor’s Guide to Financing Options for Buy & Hold Rental Property

A whole other article could be written that contains details on the pros and cons of each and going the different routes with them, but that will take up too much space here (maybe I’ll do it in a near-future article!). I think if I alert you to what each characteristic can affect, that will be a perfectly fine starting point for you to take with you as you begin to property shop.

Here goes. Remember, this is what each characteristic may potentially impact with your investment (characteristic on the left, potential impact on the right):

  • Age: profit, appreciation, resale
  • Condition: profit, workload
  • Size: resale, appreciation, tenant quality
  • Location: profit (due to secondary factors), appreciation, resale, tenant quality, vacancy
  • Price: profit, tenant quality, financing
  • Rental income: profit, tenant quality
  • Expenses: profit
  • Classification (residential or commercial): financing, workload
  • Appreciation potential: profit
  • Pool: profit
  • Septic or sewer: profit

See any overwhelming patterns? I do! I see that profit is affected by an awful lot of things. Yep, profit is a tedious thing. Of course, then one may ask my exact definition of “profit,” at which point I respond with, “How much money you make (regardless of how you make it).”

I’m certain I left out some things in both of these lists. What did I miss? What characteristics have you experienced investors affect your properties and your bottom line?

Be sure to leave your comments below!

About Author

Ali Boone

Ali Boone is a lifestyle entrepreneur, business consultant, and real estate investor. Ali left her corporate job as an Aerospace Engineer to follow her passion for being her own boss and creating true lifestyle design. She did this through real estate investing, using primarily creative financing to purchase five properties in her first 18 months of investing. Ali’s real estate portfolio started with pre-construction investments in Nicaragua and then moved towards turnkey rental properties in various markets throughout the U.S. With this success, she went on to create her company Hipster Investments, which focuses on turnkey rental properties and offers hands-on support for new investors and those going through the investing process. She’s written nearly 200 articles for BiggerPockets and has been featured in Fox Business, The Motley Fool, and Personal Real Estate Investor Magazine. She still owns her first turnkey rental properties and is a co-owner and the landlord of property local to her in Venice Beach.


  1. Mario Lowe

    This was a great article. What I liked the most was when you brought the focus on what you’re expenses are and not just the price of the house. Sometimes I get so caught up in getting a good price. finding this amazing deal that I could easily not factor in the hidden costs that can come with it.

    Thanks Ali,

    By the way, I’d love to to hear more about what’s it like to invest outside of the country and actually any tips for new investors that are thinking of using creative financing as well.

    • Marco Santarelli

      What do you consider a “good price”. Price is somewhat relative. For example, a $150,000 property can give you more cash-flow and a higher cash-on-cash return than a $50,000. You need to keep your entire income and expense picture in mind. That will determine your bottom line returns.

      • Ali Boone

        True Marco but I’d be very clear as to why you are saying that- which I assume is because cheaper properties can have so many expenses attached to them. Because otherwise typically the $150,000 may have a lot lower CoC than properties cheaper if all factors are consistent. So that would be for the case of atrocious expenses, what you are saying.

        • Marco Santarelli

          Hi Ali — What I am saying is that the cash-flow will be higher with the $150k property compared to the $50k property with similar rent-to-value ratios. This assumes the properties conditions are about the same, of course, otherwise we have to start making repair assumptions. The CoC returns can vary based on several factors but in general the cash-flow in dollar terms will almost always be higher on the more expensive properties when the other variables are held constant.

    • Marco Santarelli

      What are thinking of in terms of “creative financing”?

      * Doing a “nothing down” deal is very hard but possible. I’ve done a few of them in the past.

      * If you’re thinking of “seller financing” then you’ll want to find a motivated seller with some equity or with the ability to sell to you on terms.

      * If you’re thinking of a “low down” deal then again, a motivated seller willing to carry a second mortgage may be the way to go.

      As a side, we’ll have properties available with only 5% DOWN later this month. (Just PM me if you want more information.)

    • Ali Boone

      Hey Mario!

      I’m not doing anything out of the country right now, as it gets quite complicated and quite frankly the US is where the returns are right now.

      As far as creative financing, I’ve used things varying from credit cards to seller financing or using an investor partner (the latter one being the one I’ve used the most). It also depends on what you are trying to do as to what your options are.

      And yes, be very careful about expenses! They can be a killer, and so many people forget they even exist.

  2. Marco Santarelli

    Here is a short list of some of the issues I see above:

    Age will affect every properties bottom line over time through normal wear and tear, maintenance and repairs. But the age of a property does NOT affect it’s appreciate potential. The market and neighborhood factors do.

    Unless you’re buying a fixer-upper, you should buy properties with little to no deferred maintenance. That way you know what any upcoming costs will be. You can also budget and amortize your costs.

    The size of the property does NOT affect it’s appreciate potential. Property values are based on recent comparable sales in the same area and are adjusted accordingly. Unless you’re building a property that is much bigger or much smaller than what is considered “neighborhood normal”, local residential real estate appreciates at the same rate (holding condition constant).

    Always buy properties within a neighborhood’s normal size range, including the number of bedrooms and bathrooms.

    The rental income does not affect “tenant quality”. First of all, what does this mean exactly? Rental income between markets can and do vary greatly. A property that rents for $1000 a month in one market can be a shack in a blighted neighborhood, while that same $1000 can get you a great 3-bedroom home in another market.

    Rents also vary by area within a given market. In short, the dollar amount is a relative variable and therefore the tenant quality is a function of the neighborhood and amenities in and around it. The best advice is to stick to properties with good rent-to-value ratios in good neighborhoods.

    Last, but not least, “hope” for appreciation is not a strategy. This is very dangerous thinking and one we advise our clients against all the time. If “major appreciation” is what you consider to be your strategy, then consider “major depreciation” to be the risk that goes hand-in-hand with it. I’ve seen this play out with thousands of investors back in 2006-2008.

    Remember that appreciation is NOT profit unless and until you realize that gain by selling your property, or cashing out through a refinance. Until then it’s just a number. Do what our clients do – focus on cash-flow first and the equity gains will follow through amortization and appreciation in good markets.

    Continued success!

  3. Great list of factors to consider Ali!

    After over a decade of experience in this industry, I’d have to say location is the one factor that stands out the most in my opinion. I’ve done some deals that just did not turn out well due to my lack of poor judgement as I chose price over location. Though, I guess learning is part of what we do. At times, it can be like a wild roller coaster with its ups and downs!

    Great reminder piece. Hope you’re having a good weekend! 🙂

  4. Ayodeji Kuponiyi

    With all the options out there it’s definitely overwhelming. Location and conditions are definitely important to me. Initially I was considering buying turn key duplex, triplex, and fourplexes but now I’m considering 5plexes and above to reach my goal of making $5,000+ per month in cash flow.

    • Marco Santarelli

      Ayodeji — you don’t need to move into the commercial space (5+ units) to reach your goal. It’s just as easy, or easier, to build a residential portfolio. In fact, most real estate investors go that route and are very successful with it.

      If you are just starting out, get your feet wet with the 1 to 4 unit properties first. 🙂

    • Ali Boone

      That’s great, Ayodeji! Have you gone much into the ins and outs of commercial financing versus residential financing? Also, just make sure you understand the cons associated with commercial (at least at the level of comparing 5plexes to residential 4plexes).

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