Successfully investing in rental properties requires a careful assessment process. Despite the fact that rental rates are a vital component of analyzing any property’s potential, there are numerous things beyond rental rates that ought to be considered too. Profitable rental properties tend to share a number of common features, aspects that would help maximize their value and earning potential. Beyond rental rates, the five most important things to look for in a rental property are appreciation potential, future development, property taxes, the number of rental listings in the area, and the local vacancy rate. By including these five things in your rental property search, you will maximize your chances of having a successful rental property investment in Middleton.
The current value of any potential investment property is at the priority list for most investors. Still, perhaps equally important is a property’s potential to appreciate over the long term. Real estate investment is designed to build wealth over the years, even decades. Therefore, it is crucial to take a closer look at potential investment properties through that lens. Properties in locations that are growing or undergoing revitalization may be good candidates for strong appreciation in value, as are properties in areas that consistently offer good employment and other opportunities.
Another important aspect to study when searching for a rental property is the area’s potential for development. An area with plenty of new construction may significantly impact existing property values, either by increasing or decreasing them. When considering a rental property, it is important to absorb information about any plans to develop or renovate homes or other structures in nearby areas.
Along with the impact of future development, an area’s current and future property taxes are one other important point to research. High property taxes are not automatically a reason not to buy the property, primarily if the house is located in a valuable area. Furthermore, low property taxes may be a sign of declining property values or even a temporary feature, if the property is located in a developing area. In particular, homes located in developing areas may experience sharp increases in property taxes as the city or region requires more services to meet the needs of a growing population.
Area Rental Listings
The number of rental listings in any particular area is an important aspect of assessing an investment property’s potential. If the neighboring area has a high number of rental listings, this could be a sign of a strong seasonal cycle or probably even a signal of a community in decline. Perfect rental property is located in an area with strong demand, which every so often associates to a relatively low number of available listings at any given time. Irrespective of the number of rental listings, it is important to find out as much as you can about the area prior to pursuing an investment property there.
At the same time, as a high number of listings is a reason to investigate further, so are high vacancy rates in the area. The more rentals that are available, especially if the number of rentals has exceeded demand, the lower rents must be to attract quality tenants. If rental homes are standing empty for weeks or even months, that is a likely mark of a saturated market. On the other hand, low vacancy rates could mean higher rents, thereby letting you maintain a profitable investment.
When searching for investment properties, it’s important to take a comprehensive view of each property’s potential. By including these five aspects of your search, you can more easily determine whether the rental property you are considering is right for you.
At Real Property Management Greater Madison Metro, we have a dedicated team of Middleton property managers who will help you with this determination process and make your search more efficient. Our professionals are available to assist real estate investors through an array of quality services, offering our market expertise and data to ensure that your next rental property will help you come one step closer to your long-term investing goals. For more information, contact us today!
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