Investing in single-family rental real estate is far more akin to running a small business than owning stocks or bonds. With securities, investors own a tiny chunk of a company that has a board of directors and a management team. These leaders pool many decades of industry-specific experience. If you purchase a single-family rental property, making the crucial decisions becomes your purview. Because of this, fully understanding the rental real estate business makes all the difference. With dedication, the returns on rental real estate can exceed the securities markets. Here are 3 expert tips to make it happen:

1.Due Diligence

Before taking the plunge on a single-family rental, analyze both the economic and physical conditions of the property, advises Alex Hemani in Forbes Magazine. Work with a real estate broker who provides a thorough assessment of the property’s prospects. A comprehensive home inspection often makes the difference between buying profitably and buying a lemon, especially when considering older homes. Potential problem areas, like foundations, wiring, and mold behind the walls, need thorough examination. If the house isn’t up to code, you’ll have to pay to make it rentable.

2.Location sets the rent

Rental rates hinge on the local market’s prevailing rental rates. Complete understanding of what the house fetches on the rental market makes or breaks the deal. If the rent isn’t high enough to compensate you for the repairs needed on an older house, it’s best to walk away from the deal. If a property has bad wiring, you’ll have to replace it, but you can’t charge more rent because of new wiring. The market rate is the market rate. Profitable deals require baking the cost of repairs into the purchase price. Putting some money into fixing an old house makes sense in many urban centers like San Francisco, where the location means high rent, even for less than ideal houses. But even in hot areas, rent depends on the neighborhood, street, and many local factors.

3.Act fast

The good properties don’t stay on the market long. Certain homes are ideal for rentals. They are the right size and in the right location and price range to attract tenants. Unless there is a problem with the home, many investors will try to grab it. To act quickly without shortcutting your due diligence, have your ducks in a row. Understanding the local market and having your financing worked out leaves you ready to make a business decision on a property faster than your less prepared competitors.