So, you’ve been in the rental property business for a few years now. You’ve built up a solid portfolio of real estate investments, and you’re looking to take the next step… but what, exactly, does that look like?
For many people, that next step is building a rental property.
There are a few differences between investing in real estate that already exists and building an investment property of your own.
Building a property is a significant undertaking; it requires you to do some research so you aren’t sinking money into an unmarketable property.
Keep reading to learn about some key factors to look into before you start to build a property.
1. Schools and Crime Rates
There are two factors that have an enormous impact on the viability of any property: nearby schools and local crime rates. It’s important to have a handle on these before building a new property.
The first thing you should examine is the quality of local schools. Good schools can dramatically raise the value of nearby properties. Families are willing to pay more for their kids to get a better education.
Low crime rates also help attract renters. People want to feel safe; a brand new home in a good neighborhood without much crime feels like a sanctuary for many people.
2. Lots and Property Taxes
You’ll need to see what lots are available in the area you want to build in. This could mean vacant lots, or lots with property you plan to demolish. Either way, you should consider the fees that come with the property.
Vacant lots often carry impact fees, but the more pressing matter is property taxes. You want to make sure that the property taxes are low enough that you can afford them long-term.
Try to determine if the taxes are likely to rise in the near future; a property that’s affordable right now might become a problem in the future if a big tax hike hits. If you’re part of a married couple that is filing taxes jointly, you may be able to deduct up to $10,000 in property taxes. There are a couple of options for free tax filing that can give you an inside look at what you might expect when you actually do file your taxes.
You should also ensure that the lot you choose suits your needs. You might want to observe and map it with a drone so you know it inside and out. Click here to learn more about how drones can help your real estate business.
3. Future Developments
Look into what developments have been zoned in the area. Are there exciting new projects on the way? If so, they might attract new renters, increasing the value of any property you might build.
On the other hand, if there are developments that might drive people away–for instance, a factory that is unsightly or produces a strong odor–it may not be a great area to build a property in.
4. Vacancies and Rent Rates
Find out how many vacant housing options the area already has. If there are a lot of empty houses, that doesn’t bode well. It may mean that people aren’t interested in the area.
You should also get a feel for the average local rent. You’re going to want to stay competitive in that arena, after all. Compare rent rates with the property taxes you researched earlier to make sure you can make a profit.
Building a Rental Property the Right Way
Everyone is searching for the perfect investment rental property; why not build one? There’s a lot to consider when building a rental property, but with the proper research, you can gain a valuable asset.
Looking for more tips on real estate investments? Visit our real estate blog for expert advice.