Selecting the perfect investment property is never an easy task for investors. Many factors go into making the best choice for maximum ROI. From the neighborhood in which a property is located to the amount of property taxes you'll have to pay, a property owner must make several considerations before jumping into an investment.
With the help of the best property management company, analyzing potential investments becomes more manageable! For example, when looking for new rental properties, one factor that may not be at the top of your mind is the number of listings and vacancies in the area. This data can give insights into how in-demand homes in the area are and how other investors might struggle with vacancies in the neighborhood. Our Seattle, Washington property managers have more details about how this impacts investments.
When a property owner begins looking for a new investment property, they may notice a trend in specific neighborhoods. Maybe you're looking at a real estate listing map and see several homes for sale or rent in one area. When you look at another neighborhood a few miles away, you notice fewer vacant properties. What does all of this mean when considering a new property for your real estate investment portfolio?
A property manager can help you interpret this data and how it applies to a property you have in mind. For example, monitoring vacancy and listing trends can help you avoid a neighborhood where rental properties sit empty for weeks (or months) throughout the year.
When you see many rentals in one neighborhood, there are two things this could signal. First, it could indicate a seasonal cycle. This is often true for communities near colleges that often see a cycle of student tenants come and go as semesters begin and end.
The second reason you might see a high volume of available properties in a neighborhood is that it's on the decline. A community experiencing a downturn could be caused by growing crime in the area, businesses closing, or even a lack of city resources. If the neighborhood fails to thrive, it spells trouble for investors.
Areas with multiple property listings can indicate too many vacancies and not enough interest in the area. High vacancy rates cause an imbalance in rental property supply and demand, which forces landlords to lower the rent. In areas with too many available rentals, this may be the only way to compete for tenants when so many rental listings are available.
Other neighborhoods may have a sparse number of listings. Maybe you've looked and looked, but the options are limited. This could be because the area is new and contractors are building houses. Often, people select the house before it's completed, so it's already full by the time the neighborhood is developed.
An area with low vacancy rates can be a smart place for residential property owners to invest. When investing in a property in this area, owners can potentially charge more rent because of the lack of available properties and stiff competition from renters attracted to the area. Low demand can lead to higher rental prices (and better returns).
Now that you understand why a neighborhood might have several listings vs. a lack of many listings and how this can impact vacancies and rental prices, what does that mean for you as an investor? At first glance, it might seem obvious: avoid the areas with a high number of listings and purchase in areas with a low number of listings, right?
Well, the answer is not always that simple or direct. The best property management companies can help you weigh the pros and cons when interpreting vacancies and listing data. For example, you might purchase a property in a high listing (and high vacancy) area because it'll fit your budget, and you've found out the neighborhood is going through a "revival." While you might struggle to find renters now, you can foresee a future money-maker.
In the same way, a property owner might not always want to jump on a property in a low listing (and low vacancy) area because it could be too competitive or in a Class A neighborhood, which is typically not ideal for investors. Class A neighborhoods are often too costly long-term, making them not ideal for your ROI goals.
Property owners have many factors to consider when selecting the ideal investment. Choosing a new property is not always "cut and dry." However, working with a property management company in Seattle means you have experts familiar with the area and can help you estimate potential returns for new investments. Real Property Associates delivers professional property management services to help owners maximize ROI and make smart investment decisions. If you're navigating rental listing and vacancy data, reach out soon!
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