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How to find profitable investment property in Virginia

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Investing in rental property is far less volatile than trying to win at the stock market without insider information, but it too has its downsides. Apart from being an illiquid investment and requiring maintenance, it’s notoriously hard to decide what property you’re going to stick with.

Unless you’re a BlackRock executive, you’re going to buy the rental for a sum rather significant for your level of finances. This is why it’s important to know what to look for in the perfect investment property. Use this article as a brief guide and an introduction to the world of real estate investment.

Rental market

The first thing you should take a look at when considering whether you want to buy a particular property or not is to take a look at the rent market. This should give you a rough estimate of what your potential ROI can be. You can easily get an estimate by using an Airbnb dataset. A database like this contains information on prices and availability rates throughout the season in any given area of the US. You can see an estimate of your rental income and calculate ROI in a couple of clicks.

Another thing you can take a look at is how many ads are getting listed per month and how fast are they getting removed from the platform. If there are a lot of ads for rentals and they remain active for a long time it can be a signal that you’re either looking at a seasonal market where demand is focused on a couple of months per year or landlords are struggling to fill their rentals with tenants.

If you suspect the latter, try calling a couple of listings that remain on the site for a long time and see if they were taken and the agent simply forgot to take them down or they’re looking for tenants still.

Property taxes

Considering the property taxes you will end up paying on the new property is also an important step in choosing what to invest in. In Virginia, you have an easier time with this as local property taxes are far lower than the US average. But still, if you find a country that charges the lowest tax, you’re going to save a couple of hundred on annual expenses.

Construction quality

That aside, next thing you need to inspect is the construction quality. This doesn’t just include a decent renovation, but the overall quality of the house you’re about to buy. Roofing, piping, foundation, and electricity network are some of the things you should focus on first.

Not having a decent renovation can be a good thing because the total price of purchasing a house that doesn’t look that good and renovating it tends to be less than the evaluation increase the renovation can bring. However, if the property has significant structural problems, it can mean you need to either spend close to the property value for a significant renovation or constantly spend money on maintenance.

Having such a problem with the rental can spell financial trouble and definitely will decrease your annual income. It’s wise to take a professional with you for the final house tour before you close the deal.

Infrastructure

Purchasing a house that has structural problems can put a dent in your profits. But buying a house in the wrong location can potentially leave you with no revenue at all. Most renters do not choose the house based on looks alone. They also need all sorts of amenities around it. If the neighborhood is slowly dying with jobs fleeing and businesses closing, you’ll soon find that it’s harder and harder to fill the rental with tenants. On the other hand, if opportunities in the neighborhood are growing, you will be able to increase rent each year.

Look at the quality of the roads, where the closest amenities are like schools, shops, restaurants, etc. Visiting a local restaurant during busy hours can also be a good indicator of how well the businesses are doing. If the investment property is within adequate distance from the amenities and the neighborhood seems to be doing great, it’s another indicator your deal is going to be profitable.

Job market

Having a good idea of the job market in the area is going to inform your final decision a lot better. When the number of jobs is growing, the number of people going into the area is going to increase, bringing the prices up. When the opposite is the case, your rental income is going to suffer.

To get a general idea of the job market in the area, all you need is to find out what large businesses are in close proximity and whether they have plans to expand. You can also browse websites that post job ads like indeed.com, and see whether there are a lot of unfilled vacancies and how often they get posted.

Municipal planning

Another thing that can help you figure out what is the future of the neighborhood is going to be like is the development that is going on around the place. You can check with the municipality to see what the zoning laws are and what construction is going on. If a neighborhood has a lot going on like new shops and factories being built, it’s a sign that the location is going to have a lot of demand in the future.

Natural disasters

The last thing you have to check is how likely are natural disasters to occur in the area you’re focusing on. While Virginia doesn’t suffer from them as much as Louisiana or Florida, it’s not uncommon to see floods in some counties. If you do want to buy in an area that is prone to flooding, you may want to either reconsider or make sure you have good insurance.

Story by Gad Goldman

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