Buying income properties is not always easy. For a first-time investor, there is a lot to know before choosing a potential Fairfield single-family rental home, not all of it is obvious. Even though the price of the property is a key piece of information to have, it isn’t the most important one. In practice, 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.
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. Once you find the exact property you want to buy, make sure to obtain the accurate property tax numbers 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. 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. An area that tends to bring in residents could still be subject to high property taxes. Even though that might not always be a bad thing, it could very well be a sign of underlying issues in real estate.
An integral part of choosing your property is knowing how property taxes will affect your investment, as well as in-depth knowledge of rental rates in your area. 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.
Stay on top of things by being proactive: gather data on property taxes and rentals, and do your research on any plans for future development in the area. 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. Make sure to be aware of any new housing developments, which could potentially lower property values for residences within the area. Brand new homes are popping up in the rental market because of the many investors and builders, and these new homes could wind up being your competition.
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. 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. Every time there are plenty of vacancies, the lower rents will drop as landlords compete for tenants. It’s possible that you will end up losing money if your rental rate dips below your ongoing expenses.
While doing research on every potential income property is a lot of work, Real Property Management Southern Connecticut 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 203-821-7303 to learn more!
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