If I am buying a rental property I look at the area and the number of rentals that are in that area. I prefer to buy a single family home in an area that is mostly owner occupied. Why? Because people take care of their homes and the owners will usually have friends or relatives who want to live next to their friends and relatives which makes it easy to keep long term renters. Also I look at the economic history of the area, meaning I am looking to buy when property values are low. Since you cannot make any real money renting property because of the taxes, insurance and maintenance expenses, what I am really looking for is the potential increase in value in 5 to ten years. Keep in mind while your CPA is steadily depreciating your property on paper to save you money this year, when you sell it all of those monies must be recaptured. So you want to buy a property cheap but also one that will increase in value far more than what you will have to pay back with both capital gains and recapture of depreciation. It won’t make any sense to sell a property that is paid for if all of the money is going to the IRS.

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