Investing in Buy-to-rent Properties the Right Way
If you are a first-time investor, the idea of buying a brand new building will be daunting. This is when many landlords decide to buy-to-let properties. In this modern era, real estate is not a simple industry. The realtor market is peppered in many ways. To buy or to rent, you must choose an option with better returns. When you shop for rental properties, few features can make the move profitable. This post focuses on these features.
First of all, the rental home has high-quality neighbors. Never choose a property before understanding the quality of the neighborhood. Surroundings with high-quality neighbors will always attract new tenants and have lower vacancy rates. For example, if you decide to buy a property near a college/university, the chances of you finding tenants who are students is high. Unfortunately, these properties are likely to suffer high vacancy rates. On the other hand, when you pick properties in busy cities, you will come across tenants who are well-settled families and professionals. With such tenants, you will be able to make more money and safeguard your property too!
Property taxes is a complicated and scary process. Property taxes differ from one place to another. This makes the process scarier. When you decide to invest in a buy-to-let property, you must plan finances carefully. Be clear about how much money you are going to lose. Buying a rich property in a friendly neighborhood and paying heavy taxes is not bad. But, you should be keen on two important factors:
- Approach the municipality assessment department for more information on taxes.
- You must talk to locals and existing homeowners for more information on property taxes and hikes.
If a neighborhood is doing bad, it is more likely to increase its property taxes. This increase can be included in the rent.
If you are focusing on a property that delights families, you must ensure that there are good, reputed educational institutions around it. Properties without schools (or bad ones) will have a low ROI. In the long run, you will not be able to make a considerable amount of income from your investment. Properties without schools will see an income every month. But, you will not be able to sell it at a great price. Educational facilities can increase the net worth of your property during sales.
Would you live in a place with high crime rates?Well, no one wants to live in a neighborhood with heavy criminal activity. It is important to invest in properties surrounded by neighborhoods with low crime rates. Your areas of concern should be on serious crimes, vandalism, recent criminal activity and petty crimes. If possible, analyze the frequency of policy activity and presence in the region.
Top Tip: Never choose a property before understanding the neighborhood! It is important to ensure that the neighborhood is both safe and alive. This is when your ROI increases significantly.
Regions with high job opportunities are more likely to attract tenants. You can analyze the job market of a neighborhood using the “U.S. Bureau of Labor Statistics”. Or, visit your local library for ample information. If a major firm is planning to start a branch in the neighborhood, there are high chances of people flocking into the region. This will increase the chances of your property going to rent. Just like high employer rates, people look for places that have better chances of future development. The best place to gather information about future development would be the “Municipal Planning Department”. This department has all required information on projects that are ought to come in the area. If the department plans to have new malls, business centers, and apartments, growth will happen at a promising rate. Meanwhile, you keep an eye on projects that could affect the value of your property. For example, some developments can reduce the amount of green space around your home. Likewise, new housing projects will increase the amount of competition.
Last but certainly not least, you should be keen on how much the property will make every month. For most landlords, rental income is their primary source of money. It is bread and butter when they retire. This is why you should know all about average rent in the region. The rent must cover your monthly expenses. Also, you must be able to save a considerable amount. When you analyze on rent in a particular area, focus on the next five years.
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