The real estate market is a very profitable place to invest your money. With so many options, it’s important to think about what type of investment property fits your needs and financial situation. Thinking about investing in a rental property? Here’s 7 features of a profitable rental investment.
Choosing the right neighborhood for your rental property is crucial to your overall strategy. Since the quality of a neighborhood has a proportional relationship to the income you earn, it’s better to pick a neighborhood that is capable of earning more income like one that has low vacancy and crime rates. Too much crime or vacancy could mean the area is unattractive, making it harder for you to price your rental competitively. While scoping out a profitable rental property, make note of the neighborhood it’s located in and if there are future developments to that area.
Strong Local Economy
A strong local economy is appealing for a tenant since there is an abundance of local jobs and new opportunities to take advantage of. A strong local economy can also mean better business-friendly climates, lower taxes, and overall economic diversity. Areas where businesses are expanding and job opportunities are increasing are appealing for tenants which helps increase the profitability of your rental property.
Home Value Growth
Many real estate investors aim to turn a profit from rental property by collecting recurring rental income and building equity value. Although home prices may fluctuate from one year to the next, they historically increase over the long term. Buy and hold real estate investors take advantage of the fact that property value tends to grow overtime, and there are plenty of resources online that will help measure monthly price inflation for properties by state and metropolitan statistical area. A profitable property is one that has potential to bring cash flow and generously appreciate overtime.
A rental property’s closeness to local amenities, such as highway access, public transit, shopping malls and dining and entertainment venues are important factors in attracting tenants and maintaining profitability. A good property has access to an abundance of amenities. Think about a tenant’s incentive to find new jobs and enjoy local restaurants; they’re often persuaded to rent in areas with many attractions. Before purchasing your ideal rental property, be sure to properly research the local amenities.
Property taxes are a cost of doing business for any landlord. You can expect to pay the tax to the county or municipality where their property is located. As an owner, it’s important to understand how property taxes work and how much you can expect to pay. A profitable rental property generates more cash flow than the overhead of the property, so be sure to include property taxes when calculating overhead costs before deeming a property worthy of investment.
Return on Investment
An investment property with a high return on investment can be profitable real estate. It goes without saying that the main goal of every real estate investor is making money from the property. To start making money, property investors must invest in positive cash flow properties so they can earn more than they spend on managing and maintaining their investments.
Watch for construction in your area. You may have an opportunity to sell your property at a higher price if there is additional new housing being built nearby, or if there is a lot of construction going on. However, be aware that it could hurt the value of your home by driving down buyer interest and increasing competition for everything else in the area.
RCN Capital offers short-term and long-term financing options for real estate investors. Whether you are looking to fix & flip properties or hold properties for rental income, RCN has flexible options that are suited to your needs. Connect with us today to discuss your next real estate investment.