Unlike flipping, buying a rental property is a long-term investment, and long-term investments require long-term thinking and planning.

Real estate is an inherently illiquid investment—unlike stocks, bonds, or REITs, it costs several months and thousands of dollars to sell. Selling a rental property could take six months and $15,000, a far cry from selling stocks instantly at a $4.95 commission to a broker.

That means that making a mistake when buying a rental property is not solved as quickly, easily, or cheaply as selling a stock you decided you don’t like.

So? Don’t make mistakes!

Top Questions to Ask When Buying A Rental Or Investment Property

Yeah, that’s easier said than done. But the great thing is that you’re not the first person to invest in real estate, so there are tons of sources where you can ask questions about buying your first investment property! 

If you do it right, your learning curve will involve minor missteps rather than regret-induced migraines.

Here are nine questions to help you make rational, well-informed rental investing decisions and ensure your next rental property is a winner.

1. When were the roof, furnace, AC unit, and water heater last replaced?

Of course, there are other components to any house that you need to evaluate. However, these three things can be a good way to determine if a rental property is a good investment.

Some components, such as the framing, wiring, and plumbing, have extremely long lifespans, and the cosmetic updates are obvious enough. You don’t need me to remind you to look at the kitchen and bathroom; you know how dated or chic they are.

But it’s not necessarily obvious how old the roof, furnace, air conditioning unit, and water heater are. These can be expensive to replace, and if they need to be replaced within the next few years, you should know it before buying the rental property.

First, ask the seller. If they can’t give you a precise answer—preferably with documentation—get expert opinions. Ask your Realtor, contractors, and home inspector.

This brings me to my second point: always get a home inspection. Even if you’re buying the property as-is, you need to know what you’re getting into.

Here’s a quick reference infographic showing how long each component in a property lasts so you can get a sense of how frequently you’ll need to replace them.

2. What is my competitive advantage as a real estate investor?

Now, here’s one of the most critical personal questions to ask before buying rental investment property—or getting into any endeavor, for that matter. 

When you’re in business, you need a competitive advantage or three. And make no mistake: as a real estate investor, even a solo investor buying your first rental property, you’re in business.

You don’t have experience, so don’t count on that as your advantage. What about cash? Can you buy rental properties in cash rather than taking out a rental property loan?

How quickly can you settle if you’re using a rental property loan to buy the property? Speed can be a competitive advantage.

Perhaps you can find good deals on rental properties that other investors are missing. One way to do this is by finding properties not listed for sale and approaching the owner directly about selling. Try Propstream or DealMachine, which are powerful real estate tools to help you do this.

If you’re not familiar with it, here’s our full Propstream review, plus a two-minute overview of features:

Another competitive advantage can be your networks of off-market sellers, such as wholesalers and turnkey sellers. We include a directory of them, the Dealfinder Database, along with our FIRE from Real Estate course, but there are plenty of other ways to renovate the network as well.

Your competitive advantage could be that you can do the renovation work yourself or that you can make offers so quickly that you get properties under contract within a few hours of them being listed. Whatever your competitive advantage, make sure you’re clear about it!

3. What’s the property tax bill, and will it change when I buy the rental property?

The last thing you want is a nasty surprise when you discover that the tax bill suddenly doubled from $2,000/year to $4,000/year upon the property’s sale.

Many jurisdictions update their tax assessment value of the property when it transfers. If the property is currently assessed at $100,000, and you buy it for $200,000, that can cause the tax assessment to jump to (you guessed it) $200,000. Read double taxes.

So, you need to check on the current tax bill and assessment. One way to gather this intelligence is through Propstream, which displays it for you:

Calculate the potential property tax bill based on your purchase price if the tax assessment value is significantly lower than your price to buy the rental property. A quick Google search will reveal property tax rates in the property’s jurisdiction.

Use that new, higher property tax bill when you calculate the rental property’s cash flow.