Successfully investing in rental properties requires a careful assessment process. Even though rental rates are definitely an integral aspect when analyzing any property’s potential, there are numerous things beyond rental rates that must be considered as well. Profitable rental properties tend to share a number of common features, aspects that help maximize their value and earning potential. Beyond rental rates, the five most important things to look for in a rental property are appreciation potential, future development, property taxes, the number of rental listings in the area, and the local vacancy rate. By including these five things in your rental property search, you will maximize your probabilities of having a successful rental property investment in Dallas.
The current value of any potential investment property is at the top of the list for most investors. However, it is just as important as a property’s potential to appreciate over the long term. Real estate investment is designed to build wealth over the years, even decades. That’s why it is essential to look at potential investment properties through that lens. Properties in areas that are growing or undergoing revitalization may be good candidates for strong appreciation in value, as are properties in areas that consistently offer good employment and other opportunities.
A second important aspect to consider when searching for a rental property is the area’s potential for development. An area with a lot of new construction may drastically impact existing property values, either by increasing or decreasing them. When bearing in mind a rental property, it is crucial to take in as much information regarding any plans to develop or renovate homes or other structures in nearby areas.
Accompanied by the impact of future development, an area’s current and future property taxes are one more important thing to research. High property taxes are not automatically a reason not to buy the property, particularly if the house is located in a highly sought-after area. In the same way, low property taxes may be a sign of declining property values or even a temporary feature, if the property is located in a developing area. In particular, homes located in the developing regions may experience sharp increases in property taxes as the city or region requires more services to meet the needs of a growing population.
Area Rental Listings
The number of rental listings in any particular area is an important aspect of assessing an investment property’s potential. If the surrounding area has a high number of rental listings, this could be a sign of a strong seasonal cycle or perhaps even evidence of a community in decline. An ideal rental property is located in an area with strong demand, which often correlates to a relatively low number of available listings at any given time. Regardless of the number of rental listings, it is important to find out as much as you can about the area before pursuing an investment property there.
Just as a high number of listings is a reason to investigate further, so are high vacancy rates in the area. The more rentals that are available, especially if the number of rentals has exceeded demand, the lower rents must be to attract quality tenants. If rental homes are standing empty for weeks or even months, that is a possible sign of a saturated market. On the other hand, low vacancy rates could correspond to higher rents, allowing you to maintain a profitable investment.
When searching for investment properties, it’s important to take a comprehensive view of each property’s potential. By including these five aspects of your search, you can more easily determine whether the rental property you are considering is right for you.
At Real Property Management Lonestar, we have a dedicated team of Dallas property managers who will help you with this determination process and make your search more efficient. Our professionals are available to assist real estate investors through an array of quality services, offering our market expertise and data to ensure that your next rental property will help you come one step closer to your long-term investing goals. Please contact us online or call our Austin office at 512-520-9060 or our Dallas office at 972-949-2000 for more information.
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