Choosing the ideal investment property to add to your real estate investment portfolio can be lucrative. However, to achieve a great ROI, property owners must research more than the property itself.
When looking for a rental property, you must also consider the neighborhood. The community surrounding a rental home will impact your tenant’s quality of life and your ability to attract quality tenants to the property. Today our property management team dives deeper into why a great neighborhood is an essential aspect of a rental property purchase.
Target An Ideal Location
You may be thinking that any location with a decent property will do, but this couldn’t be further from the truth! A good landlord needs to know which neighborhoods are attractive to prospective tenants and which ones are not. Buying an excellent property in a neighborhood where renters don’t like to live can leave you with a money-losing investment.
Property owners also need to understand what tenants are looking for in terms of location, price, amenities, and more, so they can find a property that suits tenants’ needs. A property manager can be a good resource on the local market, including items that renters are searching for in a neighborhood. Here are some items that rental agencies say set neighborhoods apart.
The Type of Neighborhood
The type of tenants your property attracts, and your vacancy rate is influenced by the neighborhood where you invest. For example, if you buy near a university, you’ll most likely have to deal with students as potential tenants, making it more challenging to fill vacancies in the summer. Student housing isn’t a bad idea as long as you’re aware of some of the unique aspects of renting to students vs. young professionals, families, or baby boomers.
Your tax rate may vary widely across your target neighborhood, so it’s essential to know how much you’ll pay in taxes. High property taxes are not always a negative thing. They’re beneficial for high-end neighborhoods that attract long-term tenants. However, there are some undesirable places with high taxes as well.
You can find tax information at the local tax assessors’ office or check with an expert in property management to determine the tax rates in the area. Don’t forget you may also be able to deduct your property taxes from your federal taxes.
The Best Schools
If you’re dealing with family-sized properties, consider the quality of the local schools. If the neighborhood has no good schools, it can be detrimental to the value of your property.
Amenities That Attract the Best Salt Lake City Tenants
When researching the neighborhood, consider visiting the area and looking at the parks, restaurants, gyms, movie theaters, public transportation alternatives, and other amenities that appeal to renters. Choosing an investment property near planned or existing social facilities will be a significant attraction for potential renters.
Average Rent for the Area
Rental income will provide you with your primary source of revenue, so you’ll need to know the typical rent rate in the area. Make sure the home you’re considering can support your mortgage, taxes, and other expenses. Study the market sufficiently to determine where it is going in the next five years. If you can afford the property today but taxes are projected to rise, make sure you understand how that could impact your monthly expenses.
Other Nearby Rental Listings
If a neighborhood has many available properties, it could signify a seasonal cycle or an area on the decline. Talk with a property management expert to identify the situation and if high vacancy rates are a recurring issue for the neighborhood. When there are a large number of vacancies, landlords must lower rent to attract tenants. When there are few vacancies, landlords have greater leeway in raising rents.
No one wants to be a neighbor in a hotbed of criminal activity. Check the rates for vandalism, major and minor crimes, and if criminal activity is on the rise or falling. You can talk with the local police department or use the area library to find more details about crime rates in the neighborhood than you might be able to find online.
If a lot of construction is happening in the area, it’s likely a hot spot for growth. Keep an eye on new developments that might damage the value of your property vs. projects that could improve property values. A new, nearby housing project also might compete with your rental property. A local property manager also knows the area, including any future developments on the horizon.
Also, research local fees or permit requirements for rental properties. Some neighborhoods try to discourage rental properties by imposing stiff permitting fees and red tape.
Find the Best Neighborhoods With Expert Property Management Help
Being a successful landlord starts by finding the right property that attracts the best tenants—but it’s critical to evaluate more than the house itself. Put yourself in a potential tenant’s position and consider the neighborhood amenities before deciding on a new property.
Reeder Asset Management is ready to help you find your next rental property. Reach out to learn more about evaluating the neighborhood and how our property management services can help!
For a more in-depth look at finding a property, download our free resource, the “Biography of the Perfect Investment Property.”