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. 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. 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. 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 thorough marketing analysis to get an idea of what the market looks like around your chosen location. Using the findings of the analysis, assess whether your expected rate will cover your costs, including the mortgage payment, taxes, maintenance, and other pertinent 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
Also, remember to research any plans for future development in the area. Do this as you collect data on property taxes and rental rates. Often, the municipal planning department in your area will have helpful information on any new zoning and development plans. Make it a point to assess the neighborhood by looking around the nearby areas for any signs of construction. 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. With many investors and builders, it’s inevitable that the rental market will see more brand new homes — new housing that could wind up being your competition.
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. As long as the number of vacancies in that same area is relatively low, you need not worry about a high number of rental homes, since that isn’t necessarily a sign of trouble. On the other hand, an unusually high number of unrented properties is characteristic 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. You just might find yourself 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 Dade 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 305-501-1511 to learn more!