Investing in rental property is far less volatile than trying to make money on the stock market without insider information, but it has its downsides too. As well as being an illiquid and maintenance-intensive investment, it’s notoriously difficult to decide which property you’re going to stick with.
Unless you’re a BlackRock executive, you’re going to be buying the rental for quite a hefty sum for your level of finances. That’s why it’s important to know what to look for in the perfect investment property. Use this article as a brief guide and introduction to the world of real estate investing.
The first thing you should look at when considering whether or not to buy a particular property is to take a look at the rental market. This should give you a rough estimate of your potential return on investment. You can easily get an estimate using a Airbnb Dataset. A database like this contains information on prices and availability rates throughout the season in a given region of the United States. You can see an estimate of your rental income and calculate the return on investment in a few clicks.
Another thing you can check is the number of ads listed per month and how quickly they are removed from the platform. If there are a lot of rental listings and they remain active for a long time, this may indicate that you are considering either a seasonal market where demand is concentrated in a few months a year, or landlords are struggling to fill their rentals with tenants.
If you suspect the latter, try calling a few listings that have been on the site for a long time and see if they’ve been taken and the agent just forgot to take them down or if they’re still looking for tenants. .
Considering the property taxes you will end up paying on the new property is also an important step in deciding what to invest in. In Virginia, you have an easier time with this because local property taxes are well below the US average. But still, if you find a country that charges the least taxes, you’ll save a few hundred dollars on your annual expenses.
That aside, the next thing you need to inspect is the build quality. This doesn’t just include a decent renovation, but the overall quality of the home you’re about to buy. Roofing, piping, foundations and the electrical network are some of the things you should focus on first.
Not having a decent renovation can be a good thing, because the total price of buying a house that doesn’t look so good and renovating it tends to be lower than the increase in the assessment. that renovation can bring. However, if the property has significant structural issues, it may mean that you have to spend close to the value of the property on a major renovation or constantly spend money on maintenance.
Having such a problem with renting can lead to financial problems and will certainly decrease your annual income. It’s wise to take a professional with you for the final home visit before closing the deal.
Buying a house that has structural problems can reduce your profits. But buying a house in the wrong location can potentially leave you without any income. Most renters don’t choose a home based on looks alone. They also need all sorts of amenities around it. If the neighborhood is slowly dying with the flight of jobs and the closing of businesses, you will soon find it increasingly difficult to fill the tenancy with tenants. On the other hand, if the opportunities in the neighborhood increase, you can increase the rent each year.
Look at the quality of the roads, where the nearest amenities like schools, shops, restaurants, etc. are located. Visiting a local restaurant during peak hours can also be a good indicator of business performance. If the investment property is an adequate distance from amenities and the neighborhood appears to be doing well, this is another indicator that your transaction will be profitable.
The job market
Having a good idea of the labor market in the area will inform your final decision much better. When the number of jobs increases, the number of people entering the area will increase, which drives up prices. Otherwise, your rental income will suffer.
To get a general idea of the labor market in the area, one only needs to know which big companies are nearby and if they have expansion plans. You can also browse websites that post job openings like Indeed.com, and see if there are a lot of unfilled job openings and how often they are posted.
Another thing that can help you understand what the future of the neighborhood will look like is the development taking place around the square. You can check with the municipality what the zoning laws are and what construction is going on. If a neighborhood has a lot going on, like new stores and factories being built, that’s a sign that the location is going to have a lot of demand in the future.
The last thing you need to check is the likelihood of natural disasters occurring in the area you are focusing on. While Virginia doesn’t suffer as much as Louisiana or Florida, it’s not uncommon to see flooding in some counties. If you want to buy in a flood-prone area, you might want to reconsider or make sure you have good insurance.
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