When thinking about what rental properties will provide you the most return, single-family residence investment property is the best choice. Single family residence homes tend to be in demand, attract long-term residents, and retain or appreciate in value over time. When looking for a home to invest in, consider a few key factors to check carefully before making that offer. Market value is just one of the features to consider when choosing an investment property.
PRICE:For your first step in identifying a good single family residence investment property, find a single family residence offered below market value. However, consider also that the reason the home is bargain priced is just as important as the price tag. Homes in need of minor repairs or cosmetic updates might seem like a great deal, and often they are – just be aware that the house does not have extensive damage or require major repairs. A Fixer-upper always seems like a good idea in theory, however it is advised to factor in anything you into your rental margin. Look for single-family residence homes that are below market value, this might be that the sellers just is in a hurry or have estimated the value of their home incorrectly.
LOCATION: Another important factor in choosing an single family residence investment property is location. It is a buzz word used over and over again in real estate, but that is because it is true. Location is very important. Location of the home may determine whether you will be able to profit from your investment. Check out the neighborhood carefully, including the number of other rentals nearby and how much similar homes are renting for. Areas with low crime rates, excellent schools, close to public transportation, employment, shopping opportunities, or other appealing features are ideal. One thing that might be a hindrance is seeing a lot of vacant rentals or low rents in that neighborhood, these may be sign that you should research the area more to find out why and if the area is a good fit for you. Your ideal location of your single-family residence investment property will be one that has relatively low market values but comparatively high rents.
RATE OF RETURN: Beyond the price of the home and the location, you must also crunch the numbers of your single family residence investment property. A well executed investment will give a stable rate of return. In real estate, this rate, or capitalization rate, can vary by area, but usually ranges between 4% and 10%. How does one calculate this rate? Capitalization rate for a potential single-family residence investment property is your net operating income (rents less expenses) and divide it by the home’s sales price. In calculating, be conscious of all the fees and taxes for expenses. This may take some exra work, like going to the county assessor’s office to find out the property tax. Association fees and any extra insurance required if the home is in an area prone to natural disasters. Once you have gathered all the expenses, it is time to see if the rate of return is profitable. It’s best to keep total expenses to about 50% of the gross rents – this is known as the 50% rule. If any property you are considering doesn’t offer a good return.
MANAGEMENT: To ensure the continued profitability of your single family residence investment property, you must keep costs low. You need a trustworthy, professional property management company that understands your investment goals. At Real Property Management Coeur d’Alene, we have the expertise to reduce your costs and help keep your profits high. With our industry knowledge combined with our wide spectrum of vendors we find the quality price for the quality job. With our competitive pricing and guarantees, you can be confident that your real estate investment is in the right hands.