Buying income properties can sometimes be tricky. Before choosing a potential Baltimore City single-family rental home, a first-time investor needs to know quite a lot of things. That’s because not everything is obvious to first-time investors. While it is true that the price of the property is a key piece of information to have, it doesn’t mean that it is the most important one. Actually, the top four features to watch for in a great income property are property taxes, rental rates, future development, and vacancies. By researching these four areas, you can better narrow your property search down to the best options. From there, you can choose the most profitable ones.
The cost of an income property begins with the sales price but certainly doesn’t end there. Investors with years of experience understand how ongoing expenses such as property taxes can have such a huge impact on 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, and other towns now are offering this information online. Property taxes can become a subject for discussion in the press. So, carefully check your local news for any hints of a tax increase in the near future. High property taxes, though not necessarily always a bad thing, may serve as indicators of economic trouble in areas with relatively good residency.
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. A thorough marketing analysis can provide detailed information regarding the average rental rate in the area which you plan to buy. This can be of great help to you, for when you finally decide to make that purchase. Refer to the data yielded by the analysis to help you assess whether your expected rate will cover your costs, including the mortgage payment, taxes, and maintenance. Keep track of the rental rates in the neighborhood. Gauge them to get an idea of where they might be heading. This will allow you to stay on top of your property taxes. Looking at the recent past may help, as will staying on top of local development projects or shifts in demographics.
Also, remember to research any plans for future development in the area. Do this as you collect data on property taxes and rental rates. In most instances, the municipal planning department in your area will have helpful information on any new zoning and development plans. Construction sites may be good signs of ongoing development in an area. This is something to look out for around your neighborhood and in the areas nearby. If a lot of building is underway, that may be a sign of an area experiencing strong growth. Also worth noting are any new housing developments, which could potentially lower property values for houses in the area. More investors and builders are putting brand new homes on the rental market which could eventually wind up being your competition.
The final key feature for choosing which investment properties to buy is the number of listings and vacancies in your area. 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. However, if you notice an unusually high number of unrented properties, that could be a sign of a neighborhood in decline. Should there be a lot of vacancies in your area, the lower rents will go as landlords compete for tenants. You just might find yourself 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 Prime 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 410-415-1736 to learn more!
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