Investment properties are a great way to diversify your income streams. Further, they are also relatively passive in generating revenue for you, and you can count on a reliable stream of money each month, which is a huge benefit over other types of investments. In the US, there are more than 22 million units owned by individual investors.
However, you don’t want to waste your time with properties that will cost you more than they bring in, or which become a full-time commitment to manage. Read on to get a few tips on how to find investment properties that can increase your income.
Look Up the Property Taxes
When looking at investment properties, you should always remember to look up property taxes. You should always factor this into the cost of purchasing a property, and your long term forecasts for earnings. It’s also a good idea to see how much, if at all, property taxes have increased over the past 10 to 20 years.
Consider Weather Factors and Insurance Costs
Another thing that is often overlooked when considering buying an investment property is environmental danger. How close are the properties you’re looking at to the water? Is there a history of flooding or forest fires, or are you located in an area that is hurricane-prone?
Not only do these questions give you a good idea of the types of repairs and dangers that could affect your income in the future, but they also give you an idea of what type of insurance you need. Of course, higher insurance costs can also eat into your revenues and should be factored in before you make an offer.
Investment Properties That Don’t Need Maintenance
Many properties on the market, especially in up and coming neighborhoods, may come with a laundry list of repairs and maintenance that you’ll need to do. You should avoid these properties if you need immediate income from your investment.
This is not only because the repairs and maintenance will cost you money in the short-term to do, but will also cut into your rental income. This is because tenants can’t move in so long as construction is still going on.
Investment Properties That Need a Little Love
On the flip side, prospective investment properties that need a little love like paint, a couple of new fixtures, and (maybe) flooring can be purchased at a lower initial investment. If you have cash or a line of credit to do the repairs, this may be a good option for your real estate investment strategy.
Usually, the upfront cost of repairs like these increase the overall value of the property beyond the out-of-pocket expense.
Consider Vacancy Rates and Nearby Industries
You should always look at the vacancy rate of your neighborhood, as well as how many listings pop up. A high vacancy rate can indicate that people are looking to move away for some reason.
Further, nearby industries can affect vacancy rates. An investment property near a university, for example, may struggle to find tenants and therefore income in the summer months.
The same may be true for properties in areas that are heavily dominated by the tourism industry. A ski chalet is really only rentable during the winter, after all.
Take Your Time to Find the Best Possible Property
Now that you have a few tips on how to find investment properties, you can begin the research process. Be sure to take your time: it’s important that you compare properties to one another and find the best fit for your budget and needs. There’s nothing wrong with waiting for a while until something better comes on the market.
If you would like a real estate agent that will actively search and vet properties for you in the Baton Rouge real estate market, contact me today.
