Buying income properties can be difficult. There is a lot to know before choosing a potential James Island single-family rental home. It’s not all obvious for first-time investors. The price of the property is really a key piece of information to have, but that doesn’t mean that it is the most important one. As a matter of fact, the top four features to watch for in a great income property are property taxes, rental rates, future development, and vacancies. By researching and gathering information in these four areas, you can better narrow your property search down to the best and most profitable options.
Property Taxes
The cost of an income property begins with the sales price but certainly doesn’t end there. Experienced investors are aware that ongoing expenses such as property taxes can impact 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, as well as different cities that 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. High property taxes, though not necessarily always a bad thing, may serve as indicators of economic trouble in areas with relatively good residency.
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. After having determined which area you plan to invest property in, the next best step is to know what the average rental rate is. This is when a thorough marketing analysis is needed. The analysis provides you with the details you need prior to making the big decision of purchasing. 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. When it comes to property taxes, try to gauge the trajectory of the rental rates in the neighborhood. It’s good to take note of where they might be headed in the future. 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. In most situations, 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. Also worth noting are any new housing developments, which could potentially lower property values for houses in the area. With these developments come new housing on the rental market put up by investors and builders. Be wary, as these could wind up being your competition!
Vacancies
And, the last thing you need to know is the number of listings and vacancies in your chosen location. Gaining knowledge of this will ultimately help you choose which investment properties to buy. A specific area with a high number of rental homes isn’t necessarily a sign of trouble, provided that the number of vacancies in that same area is relatively low. However, if you notice an unusually high number of unrented properties, that could be a sign of a neighborhood in decline. As long as there are a lot of vacancies, the lower rents will go as landlords compete for tenants. You could even 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 Distinguished Care 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 828-342-9683 to learn more!
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