Buying income properties can sometimes prove to be challenging. For a first-time investor, not everything is obvious; there is a lot to know before choosing a potential Hoover single-family rental home. While it is true that the price of the property is a key piece of information to have, it doesn’t mean that it is the most important one. Actually, the top four features to watch for in a great income property are property taxes, rental rates, future development, and vacancies. By gathering as much information as you can in these four areas, you can better narrow your property search down to the most profitable options.
Property Taxes
The cost of an income property begins with the sales price but certainly doesn’t end there. Investors with years of experience understand how ongoing expenses such as property taxes can have such a huge impact on the long-term profitability of your rental home. Property taxes vary widely from town to town, and sometimes even neighborhood to neighborhood. It’s crucial that you get the accurate property tax numbers for the exact property you want to buy before making your offer. Most municipalities have an assessment office with tax information on file, and other towns now are offering this information online. For any hints of a property tax increase in the near future, it would be wise to check the local news carefully every now and then. Generally, high property taxes are not always a bad thing. However, it’s worth noting that high property taxes might be an indication of underlying problems.
Rental Rates
In-Depth knowledge of rental rates in your area is just as important as your knowledge of how property taxes affect your investment. Every district has a specific price range for property rentals. The first consideration when looking for property in a specific area is the average rental rate. After determining your budget, the next step would be to conduct a thorough marketing analysis to get an idea of what the market looks like around your chosen location. This information can be used to solidify your assessment if your expected rate will cover your costs, including the mortgage payment, taxes, and maintenance. Keep track of the rental rates in the neighborhood. Gauge them to get an idea of where they might be heading. This will allow you to stay on top of your property taxes. Looking at the recent past may help, as will staying on top of local development projects or shifts in demographics.
Future Development
Don’t miss out on any research plans for future development in the area as you continue your data gathering on property taxes and rental rates. In most instances, the municipal planning department in your area will have helpful information on any new zoning and development plans. One good sign of development in an area is ongoing construction. Look for any signs of this around your neighborhood or in the areas nearby. If a lot of building is underway, that may be a sign of an area experiencing strong growth. A potential threat to property value can come in the form of new housing developments. They can lower the value of properties in an area, so it’s best to take note of ongoing expansions. New houses on the rental market mean potential competition. This is the direction of the property investment market when there is an abundance of investors and builders.
Vacancies
In conclusion, to determine the number of listings and vacancies in your chosen district is to fully inform your decision on which investment properties to buy. Don’t fret if you notice a high number of rental homes; that isn’t necessarily a sign of trouble, for as long as the number of vacancies in that same area is relatively low. Still, should you find that the number of unrented properties in that area is unusually high, that might be suggestive of a neighborhood in decline. If you see that there are plenty of vacancies in your town, naturally, the lower rents will go as landlords compete for tenants. It is quite possible for you to lose money if your rental rate dips below your ongoing expenses.
In Conclusion
While doing research on every potential income property is a lot of work, Real Property Management Victory can help lighten your load. We offer free rental property analyses for investors, which can help you more easily identify whether the income property you want to buy is a profitable option. Contact us online or call us at 205-793-0700 to learn more!
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