Once you've located your state, city and local submarket(s) as described in Part 2 of this series, the next step is focusing on the right types of properties. While a deal might look good on the surface, not all homes make for strong long-term investments—especially if you're targeting single-family homes or small multifamily units (2–4 plexes). In this post, we’ll walk through the most important criteria to consider when choosing a property, especially if you're early in your investing journey.

Let’s start with size and layout. For single family rentals, generally you're looking for homes between 1,000 and 2,500 square feet per unit. That range is ideal for keeping utility and maintenance costs manageable and rents in line with property purchase prices, while still offering enough space for families. Within that, single-story homes tend to be the most practical. Not only are they easier to maintain over time, but they also appeal to a wider pool of tenants—young families, seniors, and individuals with mobility issues all prefer single-level living.

As we noted in our prior blog, location matters too, and not just for the obvious reasons. You want to buy in areas where there are clear, comparable sales and rental comps. This helps you accurately estimate both the after-repair value (ARV) and rental income potential. Neighborhoods with consistent housing stock and solid local demand also tend to perform better over the long haul. More importantly, they make it easier to evaluate deals with confidence.

As far as tenant type goes, your best bet is usually workforce housing. These are modest, affordable homes that cater to middle-income tenants—think teachers, tradespeople, healthcare staff, and retail workers. This segment of the rental market tends to be stable and resilient, even during economic downturns. High-end rentals might offer bigger margins, but they’re often more volatile and expensive to maintain. On the other end, very low-end properties often come with higher turnover, increased wear-and-tear, and collection challenges. Workforce housing strikes the right balance between risk and reward.

The physical construction of the property is another major consideration. When evaluating potential homes, concrete slab foundations are preferred. While pier-and-beam or crawl space foundations might be common in some markets, they often come with longer-term concerns—sagging floors, shifting piers, water accumulation beneath the house, and potential pest problems, to name a few. These issues can quietly turn into major expenses. Similarly, avoid properties with high-maintenance amenities, like pools or jacuzzis. They add liability and ongoing cost to the owner, without adding much rental value.

Another big plus is if the property is connected to city water and sewer. Properties with well water, septic systems, or other off-grid utilities may work in some areas, but they introduce an added layer of maintenance (and a major capital expenditure if they fail), and can sometimes deter tenants unfamiliar with how those systems work.

From a construction and systems standpoint, try to target newer properties, ideally built after 1985. Homes built before then can hide costly and outdated materials: galvanized plumbing, lead-based paint, asbestos in siding or ceiling tiles, and problematic electrical components like aluminum wiring or Federal Pacific breaker boxes. Older windows and insulation can also lead to higher energy bills and letting in outside noise, which make the property less attractive to cost-conscious renters. That doesn’t mean all older homes are bad—but unless they've been fully updated, they tend to bring more surprises than you're looking for.

Flood risk is another non-negotiable for many investors. If possible, stick to homes in Flood Zone X or X500, which are generally considered low risk. Properties in higher-risk flood zones can carry dramatically higher insurance premiums and require special consideration before financing.

Now, if the property does need rehab, be selective. Early in your investing career, especially if you're self-managing the project, it's wise to keep things simple. Look for homes that are livable and mostly need cosmetic updates. Avoid major rehabs, like fire-damaged properties or those missing kitchens or bathrooms, especially if you’re planning to use conventional financing—which typically requires the property to be in habitable condition at the time of financing. Focus instead on homes where the scope of work is straightforward and within your comfort zone: paint, flooring, fixtures, and basic repairs.

Finally, never buy a property without running your numbers thoroughly and realistically. That means building a complete financial picture—not just rent minus mortgage, taxes and insurance. Start with your expected rental income, ideally confirmed by multiple opinions from local property managers or leasing agents. Build in a reasonable vacancy rate (usually around 5–10%) and then factor in all your expected expenses. This should include taxes, insurance, maintenance, capital reserves (for big-ticket items like roofs and HVAC systems), property management, leasing fees, turnover costs, HOA dues (if applicable), and any local taxes or licensing fees.

From there, calculate your expected mortgage payment based on your actual loan terms. Add in your true total investment, including down payment, closing costs, and any upfront rehab work. Only once you’ve put all this together can you determine if the property will cash flow—and whether the return justifies your investment.

Buying the right rental property isn’t about luck—it’s about discipline. The best investors don’t chase shiny deals or “gut feel” hunches. They apply a clear set of criteria, stay focused on their goals, and buy properties that make financial sense both today and ten years from now.

In Part 4 of this series, we’ll dig deeper into the property diligence process—how to inspect what you’re buying and get reliable estimates for any rehab work needed, all before you are committed to purchasing the property.