Buying income properties could be a really stressful business. There is a lot to know before choosing a potential Elgin single-family rental home, not everything is obviously clear to first-time investors. While the price of the property is a key piece of information to have, it is not the most important one. In fact, the top four features to watch for in a great income property are property taxes, rental rates, future development, and vacancies. By engaging in some due diligence and taking into consideration as much data as you can in these four areas, you can better narrow your property search down to learn and choose the most profitable options.
The cost of an income property begins with the sales price but certainly doesn’t end there. As skilled investors find out by much experience, ongoing expenses such as property taxes can indeed have a great impact on your rental home’s long-term profitability. Property taxes vary widely from town to town, and sometimes even neighborhood to neighborhood. It is critical to get the accurate property tax numbers for the exact property you want to buy before making your offer. Most municipalities have an assessment office with tax information on file, with increasingly more towns now offering this information online. You will need to even check local news carefully for any hints of a property tax increase in the near future. Despite that high property taxes are not always a bad thing, exactly in a location that is acknowledged to captivate long-standing tenants, they might furthermore be a proof of a town in distress.
Knowing how property taxes will affect your investment is a necessary feature of reaching a decision on the choice of your upcoming property, but so is in-depth knowledge of rental rates in your area. A thorough marketing analysis of the place where you aim to invest in may help you know what the average rental rate is. This rate, alternately, could help you to assess whether your expected rate will cover your costs, including the mortgage payment, taxes, maintenance, so on and so forth. Same as property taxes, you’ll need to venture and gauge where rental rates in the neighborhood may be headed in the near future. Looking at the recent past may help, as will staying on top of local development projects or shifts in demographics.
As you collect your data on property taxes and rental rates, don’t dismiss to research any plans for future development in the area. Oftentimes, the municipal planning department in your area will have helpful information on any new zoning and development plans. It is likewise a brilliant plan to look around the neighborhood and nearby areas for signs of construction. If a lot of building is underway, that may be a sign of an area experiencing strong growth. It’s similarly vital to observe any other new housing developments, which could potentially lower property values for already existing homes in the area. New housing could also wind up being your competition, now with more and more investors and even builders putting brand new homes on the rental market.
On a final note, the fourth necessary detail you can use to figure out which investment properties to buy is the number of listings and vacancies in your locale. A vicinity 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. In the instance that you are noticing unusually high numbers of unrented properties, though, that might be a signal of a neighborhood in decline. The more vacancies there are, the lower rents will go as landlords compete for tenants. In the end, you could 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 Northwest Chicago Suburbs 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 847-892-4040 to learn more!
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