Investing in a property, whether it’s a single-family home, a condo, or a multi-unit building, can be a lucrative industry, but there are several factors that can determine whether or not a property is successful. Much of it comes down to the property itself. When deciding which property to purchase as a real estate investment, there are several things to consider. You may already know that location is incredibly important in real estate, but there are a few others that may not be as obvious.
At Lido Real Estate, we have years of experience in the property management industry and we understand what characteristics and key points help to make a property successful. If you’re looking to purchase real estate, we can walk you through the process, analyze the market, and look at specific details of the property to make sure that you’re getting off on the right foot.
Features of an Investment Property That Help Make it Profitable
This is one of the more obvious factors, but may also be one of the most important. If a potential property is located in a more residential area, you’ll attract different types of tenants than a property that is located in a busier retail area, or one that is near a college or university — college students who leave for the summer could leave you trying to scramble to fill vacancies.
There are various costs associated with investment properties, and property taxes is a big one. Look at the area’s property tax rate compared to nearby or similar locations. It may be worth paying a higher tax rate for a valuable property that will attract long-term tenants, but high property taxes doesn’t always mean the area is worth it. You’ll also want to be aware of potential property tax increases so you can effectively budget.
If your target market is families with school-age children, then a great school district will be important. Properties in a better school district can be worth more, helping to increase your ROI and may attract better tenants.
While there is some research and debate surrounding whether or not crime, and the severity of the crime, can affect property value, the truth is that no one wants to live in an area that is known for criminal activity or a high police presence. There is public information available at the local police station or library, so spend some time looking at crime rates and whether it is decreasing or increasing.
If there aren’t any jobs in the area, you can bet that not many people will want to live there. You can find information through the U.S. Bureau of Labor Statistics. You can also pay attention to commercial development that may be occurring in the area. When new businesses are starting or moving to the area, it can increase how many jobs are available, leading to people needing homes in the area as well.
Being in a busy area like Orange County, there is no shortage of amenities, but spend some time getting to know the area and what services are available nearby. People want a grocery store that is close, other shopping centers, parks, restaurants, movie theaters, hospitals, etc. Having these things nearby will increase the quality of living for your tenants.
Development can be both good and bad, it simply depends on what kind of development is occurring. Commercial development can bring jobs and entertainment; however, residential development, whether it’s single-family homes or apartment buildings, could be your competition down the road.
Listings and Vacancies
Neighborhoods go through periods of inclines and declines. If possible, look at data around the number of listings and vacancies to determine the growth cycle of the area. Even though it may feel like a negative, if there are a lot of vacancies, but the number is trending downwards, it could be a sign that you’re purchasing before the start of an incline.
Do some market research to see what the average rent is in the area. The amount of rent you charge will determine how much money the property will bring in, so this is another very important factor when deciding where to purchase an investment property. You can also gather information about whether the rents are in a period of growth or decline.
If you’re jumping into the property investment game, it starts with getting the best property possible. The team at Lido Real Estate can help navigate you through the various steps of finding a property, getting financing, making the purchase, and even with property management services.
If this is your first investment property or your fifth, get in touch with Matt and Jen of Lido Real Estate for professional service in the Orange County area.