Buying income properties could be a difficult business. There is a lot to know before choosing a potential Jamestown single-family rental home, not all is clear to first-time investors. While the price of the property is a key piece of information to have, it is not the most important one. In truth, the top four features to watch for in a great income property are property taxes, rental rates, future development, and vacancies. By fulfilling your due diligence and collecting as many facts as you can in these four areas, you can better narrow your property search down to find out the most profitable options.
The cost of an income property begins with the sales price but certainly doesn’t end there. As certified investors perceive, ongoing expenses such as property taxes may have a strong impact on your rental home’s long-term profitability. Property taxes vary widely from town to town, and sometimes even neighborhood to neighborhood. It is vital to take 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, with a growing number of towns now offering this information online. You have to, furthermore, check local news carefully for any hints of a property tax increase in the near future. Even though high property taxes are not always a bad thing, particularly in a place that is widely known to draw lasting tenants, they may even be a signal of a town with problems.
Knowing how property taxes will affect your investment is a vital factor when singling out your next property, but likewise an in-depth knowledge of rental rates in your area. A thorough marketing analysis of the location where you are intent on buying will help you know what the average rental rate is. This number, at the same time, would help you assess whether your expected rate will cover your costs, including the mortgage payment, taxes, maintenance, and soon. Similar to property taxes, you’ll have to make an effort and gauge where rental rates in the neighborhood may be headed anytime soon. Looking at the recent past may help, as will staying on top of local development projects or shifts in demographics
As you gather and organize your data on property taxes and rental rates, don’t neglect to research any plans for future development in the area. Frequently, the municipal planning department in your area will have helpful information on any new zoning and development plans. It is, moreover, an excellent idea to look around the neighborhood and nearby areas for signs of construction. If a lot of building is underway, that may be a sign of an area experiencing strong growth. It’s equally necessary to review several new housing developments, which could potentially lower property values for current homes in the neighborhood. New housing could also wind up being your competition, what with more and more investors and even builders putting brand new homes on the rental market.
Ultimately, the fourth vital feature to make use of whenever deciding which investment properties to buy is the number of listings and vacancies in your locality. A community with a high number of rental homes is not necessarily a sign of trouble, as long as the number of vacancies in that same area is relatively low. Just in case you are seeing unusually high numbers of unrented properties, notwithstanding, that may be proof of a neighborhood in decline. The more vacancies there are, the lower rents will go as landlords compete for tenants. You may surely end up losing money if your rental rate dips below your ongoing expenses.
While doing research on every potential income property is a lot of work, Real Property Management of the Triad 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 336-355-6677 or 336-777-7444 to learn more!
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