Buying an investment property is an incredibly rewarding experience and perfect for generating additional income. While purchasing an investment property has its benefits, you must choose the property carefully.
Understanding the primary features to look for in a property is critical to ensure you make a wise financial decision. Before moving forward, you must understand what to look for in a potential property.
Here are five critical features to look for in an investment property to make the process easier:
1. Property Tax
Purchasing a rental property can be highly profitable and a wise financial decision for many people–if you know what to consider before you invest. The first thing to remember when deciding whether to purchase a property is the property tax. These taxes are imposed on properties based on various factors to determine a property’s assessed value. This consideration is so important because of how drastically property taxes can vary depending on the area.
Property taxes significantly contribute to your overall operating expenses and can influence your final decision as an investor. These taxes are a specific percentage of a property’s assessed value. While high property taxes aren’t always a bad sign, there are plenty of places with a lower quality of living and high property taxes that you’ll want to avoid.
Before making a decision, research specific property tax rates in the areas you’re considering investing. Remember that these taxes impact your cash flow and should be budgeted for when determining your potential return on investment (ROI) for your property–and don’t forget to consider possible rate increases in the future that could impact the ROI in the long run.
Smart property investment doesn’t only require an assessment of the property itself–it should also include an assessment of the neighbourhood to determine whether your potential investment is worthwhile. The neighbourhood you choose for your property influences the types of residents drawn to renting your property and whether or not your property will be enticing enough to potential tenants.
The more necessities near your property, the likelier you are to get people willing to pay specific rental amounts, and the more profitable your asset will ultimately be. Also, consider the neighbourhood’s overall safety when making a financial decision and understand crime trends in the area before moving forward and taking a chance on a property.
If a property requires significant changes to make it appealing to the market, it might not be the best choice for your investment. Your buying strategies should be built around how much renovating specific properties need, as this can guide your decision-making and help you narrow down your options.
Assess each property carefully to determine its current condition and what upgrades will be necessary to make it profitable. Consider the cost of these renovations, including additional costs for labour, materials, permits, and other expenses that might arise during the process. If the ROI for your renovation isn’t promising, you should consider a different property, that requires less maintenance.
4. Average Rent
Property investing relies on rental income to remain profitable for the investor. Before moving forward with any investment decision, you should clearly understand the average rent paid in the area you’re looking to buy in. It is important to understand that high rent prices don’t always guarantee a positive return.
Taking into factor average rent, you should also consider whether the property will appreciate. You might be able to charge more in rent if you move forward with renovations, improving your chances for a higher return. Always research the area you looking to buy in by checking recent rental listings and consulting property management companies.
Determine whether the area’s rental prices are likely to increase in upcoming years–this not only gives you an understanding of what you can expect to earn in rental income but also what kinds of property taxes you’ll have to pay. Make sure you assess the rental market as a whole–details like low vacancy rates and historical rental performance can help you identify how rental prices have evolved and what they’ll look like in the upcoming years.
5. Types of Property
The type of property you’re interested in can significantly influence your overall decision, and you should consider various options before choosing one type of rental property over another. These properties will have varying average rents and other factors that might make one more suitable for your investment goals than another.
Some common property types you might consider investing in include the following:
- Single-family rental homes
- Multi-family rental properties, including buildings with numerous separate units like apartment complexes, duplexes, or triplexes for multiple rental streams
- Commercial properties like retail spaces, warehouses, and office buildings
- Vacation rental properties like vacation homes and Airbnb rentals
Remember that all these property types will incur different property taxes and have varying rental costs. Some types, such as multi-family rental properties, might be more challenging to manage given the broader scope of residents, so consider how comfortable you are with managing multiple units simultaneously. If you’re starting in the world of investment property and want something easier to manage, a single-family home might be a wise option to start your journey.
How Zest Realty Can Help
Making wise real estate decisions is critical to a flourishing future in property investments. No matter your real estate needs, we’ve got you covered at Zest Realty.
Zest Realty puts your well-being first to ensure you succeed in your real estate transactions. Whether you’re buying, selling, leasing, managing, or investing in property, the experts at Zest Realty can help you navigate the world of residential and commercial real estate processes with confidence in your decision.
Don’t wait to begin the investment process. Contact the team at Zest Realty today to learn all the best property investment strategies!