Buying income properties can be a complicated business. For a first-time investor, not everything is obvious; there is a lot to know before choosing a potential Torrance single-family rental home. While the price of the property is key, it isn’t the most important piece of information to have. Really, the top four features to watch for in a great income property are property taxes, rental rates, future development, and vacancies. Through researching and gathering data about these four areas, you can better narrow your property search down to a short-list and then select the most profitable options.
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. As other media outlets are keen on releasing these kinds of information, it would be prudent to check local news carefully for any hints of a property 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.
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. Every district has a specific price range for property rentals. The first consideration when looking for property in a specific area is the average rental rate. After determining your budget, the next step would be to conduct a thorough marketing analysis to get an idea of what the market looks like around your chosen location. This information can be used to solidify your assessment if your expected rate will cover your costs, including the mortgage payment, taxes, and maintenance. As far as property taxes are concerned, remember to gauge where rental rates in the neighborhood may 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.
Your collected data on property taxes and rental rates will help you stay on top of things; but, don’t neglect research on any plans for future development in the area. For the most part, 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. Make sure to be aware of any new housing developments, which could potentially lower property values for residences within the area. 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.
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 residence with a high number of rental homes is not necessarily a sign of trouble, as long as 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. Whenever there are plenty of vacancies, you’ll see the rents lower as landlords compete for tenants. It is quite possible for you to lose 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 Choice 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 310-928-9728 to learn more!
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