Buying income properties is not always easy. There is a lot to know before choosing a potential South Burlington single-family rental home since things aren’t always clear or immediately visible to first-time investors. While the property’s price is a key piece of information to have, it is not 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. Experienced investors recognize that ongoing expenses such as property taxes do have a huge impact on your rental home’s long-term profitability. Property taxes vary widely from town to town, and sometimes even neighborhood to neighborhood. Accurate property tax numbers for the exact property you want to buy is an essential piece of information that needs to be obtained before making your offer. Most municipalities have an assessment office with tax information on file, and other towns now are offering this information online. 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. 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
Property taxes will certainly affect your investment. How they affect your investment is another piece of information that is just as important as in-depth knowledge of rental rates in your area. These are important to know before you choose your property. 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. 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
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. Generally, 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. In areas that are already populated with residents, be keen to notice any new housing developments — they can potentially lower property value. 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
Lastly, the number of listings and vacancies in the district is what you need to know to 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. But, if the number of unrented properties is unusually high, that could be indicative of a neighborhood in decline. Every time there are plenty of vacancies, the lower rents will drop as landlords compete for tenants. If your rental rate dips below your ongoing expenses, you may end up losing money.
In Conclusion
While doing research on every potential income property is a lot of work, Real Property Management Sterling 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 802-861-6468 to learn more!
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
