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. Once you find the exact property you want to buy, make sure to obtain the accurate property tax numbers before making your offer. A lot of towns are now offering this tax information online, and the number of towns that have this service is rapidly growing. What’s more, if the municipalities aren’t offering the information online yet, they usually have an assessment office where this information is on file. Property taxes are often a subject for discussion in the press. So, carefully check your local news for any hints of a tax increase in the near future. Even though high property taxes are not always a bad thing in areas that are generally known to be good residences, high taxes could indicate economic distress.
Rental Rates
It is prudent to know how property taxes will affect your investment; however, it doesn’t stop there. It is just as wise to gain an in-depth knowledge of rental rates in your area. As they say, failing to plan is planning to fail. In investments like this, thorough planning is crucial. As such, knowing what the average rental rate in the area of your choice is key information — information that can be gathered by a thorough marketing analysis. Knowing the figures will benefit you in your assessment of whether your expected rate will cover your costs, including the mortgage payment, taxes, maintenance, and other matters. The rental rates in the neighborhood may be headed towards an increase in the future. Gauge them every now and then to manage your property taxes well. Looking at the recent past may help, as will staying on top of local development projects or shifts in demographics.
Future Development
Any plans for future development in the area of your choice should be researched and taken into consideration. Couple that with the data you’ve gathered on property taxes and rental rates, and you’ve got yourself a solid investment plan. In most instances, the municipal planning department in your area will have helpful information on any new zoning and development plans. One way to go about this is by looking 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. In areas that are already populated with residents, be keen to notice any new housing developments — they can potentially lower property value. More investors and builders are putting brand new homes on the rental market which could eventually wind up being your competition.
Vacancies
The final key feature for choosing which investment properties to buy is the number of listings and vacancies in your area. 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. Should there be a lot of vacancies in your area, the lower rents will go as landlords compete for tenants. It’s possible that you will end up losing 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 Verita 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 321-972-6823 to learn more!