Smart Investments: How To Choose Profitable Rental Properties
It can be challenging for new investors who are just starting their journey in real estate investment. There are various properties to choose from and you want to avoid the common mistakes considering the high initial capital outlay of property investments.
However, you can arm yourself through extensive research to learn about the benefits and drawbacks of certain properties so they make the best choice. Our team of experts at TrueNest Property Management have written this article to help you make informed decisions about your investment property.
Survey the Neighborhood
The most important aspect of investing in real estate is knowing the neighborhood. As an investor, you should research and learn about the neighborhood you’re investing in or starting your rental business in to make informed decisions about the property.
By conducting research, you will be aware of the rules and regulations of the area as well as other costs if you plan to build rentals.
Calculate for Property Taxes
Being a landlord means you have to be prepared with property tax payments which can vary depending on the neighborhood of your rental places. The tax might be high if your area has a high rental demand but it might become a burden if your property is located in a sub-par location.
You can visit the municipality office to evaluate the tax information or check with the current residents in the neighborhood you are interested in. You should learn if the property taxes continue to rise since this can affect your rental profits.
Review the Level of Crime Rate
As a landlord, your tenant’s security should be your priority besides an affordable rent. You will want to invest in a property that provides a general sense of safety to your tenants.
See what types of crimes often occur. It is vital to know what kind of safety measures are available in the area before investing in a rental property as it is something tenants consider first.
Find Out About the Job Market
Areas with more employment opportunities are bound to attract a wider pool of tenants. So, you should research areas with a high demand job market so as to receive more rental applications. You can discover if an area has a healthy job market by researching the U.S. Bureau of Labor Statistics or heading to a local library.
Neighborhoods close to large companies are attractive since workers typically want to live near their place of employment to save time commuting.
Discover the Amenities Offered
Before deciding to invest in a property, tour the area to learn if it’s close to:
● parks, restaurants, and shops
● transportation hubs
● local attractions
● entertainment avenues
● business districts
You can check at the city hall office to learn more about the features available in the area since this can affect the decision of potential tenants and future property buyers. Including these amenities in your listing can help you interest more potential tenants.
Research on Planned Infrastructure
You may check the municipality office to see if an area has planned developments. This can be identifiable if a place has plenty of construction activity going on. The infrastructure being built indicates the potential and progressiveness of an area.
However, you also need to take into account that rental prices can decrease considering that more competition is around. So, it is important you set optimal rent prices while staying competitive in the rental market.
Learn the Average Rental Rates
As a landlord, you will make your income from the rental payments. So, it is important that you research the rental fee range in a neighborhood to make informed decisions about your investment. Compute the income you will receive after deducting the costs of a mortgage, property tax, and the other costs of running your rental property.
You should also study the potential progress of an area and be able to tell if the property taxes will rise in the next few years since this can have a lot of impact on the rental income or investment returns you will make.
Selecting an Investment Property
It can be challenging for investors to choose the ideal type of real estate investment. bFor instance, it would be a smart move to opt for a single-family unit rather than a condo. Although condo units offer little maintenance with a condo association managing the exteriors, the rent you collect can be lower, leading to a lower income.
It is crucial to look into various factors while investing in a property type that best suits your interest and yields a good return on investment.
Potential for Appreciation
Another factor to weigh in is the potential for a property to appreciate and its future cash flow. It’s also worthwhile to consider enhancing property value by considering property upgrades to draw more renters willing to pay a higher rental rate.
Bottom line
Excellent properties are abundant in every city and state, you just need to perform thorough research and review the factors outlined above. Keep in mind that no property is perfect and the most important thing is to be in a healthy financial state so you have the patience to withstand the common challenge faced by investors before earning a stable rental income.
Do you need help selecting or managing a rental property in Broward or Dade County? Contact TrueNest Property Management today! Our team of experts will help you choose the best type of property to invest in along with various other property management services.