What makes a good property for a real estate investment?

What makes a good property for a real estate investment?

Everyone wants to know the magic answer: which property is the best to invest in in order to make the most money. While there is no one-size-fits-all solution, there are some characteristics to look for when investing in real estate, such as:

1. Neighbourhood

The types of renters you attract and your vacancy rate will be determined by the community in which you purchase. If you buy near a university, students are likely to be the majority of your possible tenants, and you may find it difficult to fill vacancies every summer. Be warned that some municipalities aim to deter rental conversions by charging expensive licencing fees and adding red tape.

2. Property Taxes

Property taxes will most likely vary significantly across your chosen area, so you’ll want to know how much you’ll be losing. High property taxes aren’t always a bad thing—they might be beneficial in a desirable neighbourhood that draws long-term tenants, for example—but they can also be detrimental in less desirable areas.

All tax information will be on file at the municipality’s assessment office, or you can talk to homeowners in the neighbourhood. Check to see if there will be any property tax hikes in the near future. In a financially distressed community, taxes may be raised much beyond what a landlord can reasonably demand in rent.

3. Schools

If you’re dealing with a family-sized home, think about the quality of the area schools. Although monthly income flow will be your primary concern, the overall worth of your rental property will come into play when you decide to sell it. If there are no good schools in the area, the value of your investment may suffer.

4. Crime

Nobody wants to live next door to a crime hotspot. Neighborhood crime statistics should be available from the local police department or the public library. Check the rates of vandalism, significant and minor crimes, and make a note of whether criminal activity is increasing or decreasing. You should also inquire about the frequency of police presence in your area.

5. Job Market

More tenants are drawn to areas with increasing employment prospects. Check with the U.S. Bureau of Labor Statistics (BLS) or a local library to see how a certain area ranks in terms of job availability. If a major corporation announces a relocation, you can be sure that workers looking for a place to reside will swarm to the area. Depending on the type of business engaged, this could influence house values to rise or fall. You can presume that if you want that company in your backyard, so will your tenants.

6. Amenities

Take a walking tour of the neighbourhood to see the parks, restaurants, gyms, movie theatres, public transportation, and other amenities that attract renters. City Hall may provide promotional brochures that will help you figure out where you can find the optimum combination of public amenities and private property.

7. Future Development

The local planning department will have information on any existing developments or proposals for the region. It’s probably an excellent growing area if there’s a lot of construction going on. Keep an eye out for new construction that may depreciate the value of nearby properties. New housing could potentially put a strain on your property.

8. Number of listings and vacancies

If an area has an exceptionally high number of listings, it could indicate either a seasonal cycle or a neighbourhood in decline—you’ll need to figure out which. High vacancy rates force landlords to decrease rents in order to recruit renters in either circumstance. Landlords can raise rents due to low vacancy rates.

9. Average Rents

Because rental revenue will be your bread and butter, you’ll need to know the typical rent in the area. Make sure any property you’re thinking about renting can cover your mortgage payment, taxes, and other costs. Research the area thoroughly enough to predict where it will be in the next five years. If you can afford the region now, but taxes are likely to rise in the future, a cheap home today could lead to bankruptcy later.

10. Natural Disasters

Another expense you’ll have to deduct from your taxes is insurance, so you’ll need to know how much it’ll cost you. Insurance expenses can eat into your rental income if the area is prone to earthquakes or flooding.

 

Contact our experts for personalized advise and real estate investment planning. Call 416-878-0749 or Register here.

 

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