Telltale Signs You've Found A Profitable Rental Property
In today's market, a lot of people are looking to buy investment properties that they can rent out for a stable source of income. But finding one that fits the bill can be a challenge. You can spend weeks looking for suitable accommodation, only to find yourself concluding that you're unable to make it work economically.
At times like this, it is a good idea to step back and take stock. Remind yourself that there are opportunities to make money in the property investing market - you're just not able to see them right now.
The truth is that there are plenty of profitable rental properties out there; you just have to know the signs.
Here are the features that tell you that you've found a rental property that has legs.
The Average Rents In The Areas Are High Compared To The Asking Price
Every neighborhood can support a basic rate of rent. That's how much people are willing to pay for the market to clear. If the price is too low, more people will search for accommodation than there are units available. If the price is too high, properties will remain empty.
You need to know the average rent to figure out your likely returns. You can then compare that to the asking price of the property to figure out whether it is a good deal or not.
If annual returns from rental income amount to 15 percent gross, then it's probably a good deal. If they're less than 5 percent, you probably want to look elsewhere.
Planning Proposals Indicate Future Growth
The current price of an investment property is important. But what really matters is how that price evolves over the coming years. If the price rises in the future, then you'll be able to ramp up your rents and, ultimately, sell the property for more.
It is a good idea, therefore, to check planning and zoning in the local area. If there are approvals for major infrastructure or commercial development, then it is a telltale sign that rents are likely to rise. And if that happens, you can make a better return on your investment.
There Are Lots Of Amenities Nearby
When considering whether they should rent a property, people consider both the accommodation and the surrounding amenities. They fundamentally want to know whether a location can support the quality of life that they want.
Buyers agents, therefore, will often help investors by seeking out properties that have access to libraries, gyms, restaurants, and parks—the more fun things there are to do in the local area, the better. If the price is lower than you would expect, given the amenities, then it is a good sign to buy.
Crime Is Low
Nobody wants to live in an area ravaged by criminal activity. The vast majority of renters prefer to avoid it, and will only occupy high-crime accommodation if they're ignorant or desperate.
Most authorities publish regular figures on the level of crime by location, so check the statistics for your target area. Pay particular attention to the type of crime going on in the area. White-collar embezzling of corporate funds or tax evasion is unlikely to affect the price negatively. In fact, it could boost it. Everyone wants to live close to wealthy neighbors. Avoid areas, though, with high knife and gun crime. These places usually attract less reliable tenants.
The Local Schools Are Good
Many renters are parents with children. And, for that reason, they want to live in areas with access to good schools for their children.
If the value of a prospective investment property seems a little low to you, check the school catchment area. Sometimes you can find fabulous properties in locations that do not have access to good education. The property itself might seem great, but unless there are quality schools nearby, family renters won't want to pay as much. Often they would prefer to take more modest accommodation than miss out on quality schooling.
The Property Taxes Are High
Property taxes vary wildly from state to state and country to country, but they can have a massive impact on the amount of money you make.
Remember, high property taxes aren't necessarily a bad thing. Usually, find these in areas that tend to attract wealthier renters. And these people tend to be the most reliable, paying you on time, every month.
Low tax areas can yield reasonable returns, but not always. You need tenants of a minimum quality to make any investment viable.
Post a Comment