A lot of work is involved in making the decision to invest in real estate. And even more work is required to find, buy, and lease out a profitable investment rental property.
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We take care of the entire process of real estate investing for our clients, but we also believe everyone benefits from a basic knowledge of real estate, since all of us depend on real estate to some degree for a place to live and work.
So here’s a list of 4 features of profitable rental property, but these features are also pertinent to real estate in general.
#1 Desirable Community
The community in which rental property is located impacts its profitability.
A community with great schools is a desirable rental area for many families. These families often choose the school first, then look for homes near the school.
And don’t forget that a home in a desirable neighborhood, because of schools and other amenities, can bring a higher resale price when you sell.
Jobs are also important to a community, and therefore are important to rental markets. Jobs affect everything from supply and demand, prices, and disposable income. Rental property in a thriving community like Tampa is often more profitable for investors, compared to other cities.
Amenities such as parks can impact about everything concerning real estate. Depending on your investing profile, neighborhoods with parks, malls, gyms, shopping centers, and public transportation can make a huge difference in the profitability of your rental income.
#2 Low Vacancy Rate and High ROI
Vacancies can greatly impact the profitability of rental property. Generally speaking, it’s better to own rental property in neighborhoods with a low vacancy rate, low eviction rate, and a low time to re-lease.
If a neighborhood has an unusually high number of vacancies, it could be the result of residents having a poor rental experience. On the other hand, high vacancy rates for seasonal properties could be normal.
#3 Pricing Power
Landlords with properties in thriving communities often have more pricing power due to supply and demand, especially if they own more desirable properties.
Pricing power is important to property rental companies. That’s one reason Tampa has been ranked among the top 10 cities in the world to invest in residential rental real estate over the last five years.
#4 Low Taxes and Insurance Premiums
Higher property taxes aren’t necessarily a bad thing, depending on the community, quality of life, pricing power for rents, and the absence of state income taxes.
But rental property is generally more profitable in areas where the overall tax burden and insurance premiums are lower for residents and investors.
As an investor, be aware of how all the expense for you and your tenants will impact the profitability of your rental real estate.
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