With the housing market on a rollercoaster of ups and downs, property investors must ensure they're selecting the best homes to generate rental income. This can be a challenging task, no matter what the economic outlook is.
Many factors go into the decision to purchase a property (or walk away) to find a better investment. Some of these factors are more obvious than others, such as the property's location, the crime rate for the area, or the home's overall condition.
However, other issues are just as crucial to the success of a rental property! One of these factors is the number of listings and vacancies in the surrounding community. This information can help you analyze a property's potential to stay occupied at competitive rental rates. If you're wondering how listing and vacancy data can help inform your property purchasing decisions, read on for details from one of the best real property management Baltimore offers!
Rental Listings and Their Importance
A critical metric to analyze when looking for properties is the number of listings available in the neighborhood. As you study the number of available properties on the market (either for sale or rent), you may notice a pattern in specific neighborhoods.
Some communities may have more vacancies and listings than others. Does this mean anything to the investor, and if so, what? A rental management advisor can help you make sense of vacant rates or the volume of listings and what these factors can mean for an investment property in that neighborhood.
How a High Number of Vacancies Affects Your Rental Property's Success
What does a high volume of vacant properties indicate? In most instances, an area with many vacancies will cause an imbalance in the supply and demand, affecting prices. Landlords will have to lower prices to fill the vacancies when many vacancies exist in the area.
On the one hand, you may be able to purchase a property for a reduced price in this type of area, but you'll likely need to factor in a lower rent amount when analyzing potential ROI. Using one of the best property management companies in Baltimore can provide guidance when running the numbers.
However, sometimes a lot of vacancies can also indicate a seasonal cycle. For example, if you have a neighborhood near a university, you could see a cycle of tenants coming and going. This wouldn't necessarily indicate a negative for the neighborhood. Instead, it would mean you would see predictable turnover at specific times throughout the year. Even with a predictable cycle, property owners must budget for vacancies when students come and go.
Another reason for multiple vacancies is that the neighborhood is going downhill. It could be an area lacking resources, so people don't want to live there. Or it could mean the neighborhood has a high crime rate. Whatever the cause, real estate investors must consider a high volume of listings or vacant homes when analyzing a potential purchase.
How a Low Number of Vacancies Affects Rental Properties and ROI
Let's look at the reverse situation: a neighborhood with very few listings. If you're having trouble finding an available property in a certain area, you may have found a place where the supply is limited. This drives up the demand, allowing landlords to charge more for the rent. Renters often desire these areas because they have everything that makes for an ideal home, such as nearby amenities, low crime rates, close access to transportation, and so on.
A low number of vacancies could also be in areas under construction. New development often sells out quickly because people work with the contractors during the building process to capitalize on new housing. So, the properties are filled by the time the houses are completed.
Keep in mind that communities that have fewer vacancies often mean paying higher prices for homes. However, rental property owners can often charge more for rent in these in-demand areas. Consulting with a property management company can help you decide if paying a higher price for a property upfront is worth it for your long-term return on investment goals.
Run the Numbers and Keep An Eye On Your Goals
When analyzing a potential property to add to your portfolio, all these factors can be overwhelming. Many variables can affect the decision-making process, so it's important to keep an eye on your goals when running the numbers. For example, you may find a community in Baltimore with multiple vacancies and low housing costs, but the rental market analysis indicates the rental prices would be too low to make money on a rental property.
Still, with the help of one of the best property management companies, you find out the neighborhood is undergoing a revival. So, you can purchase the property for a reduced price and make it up later in higher rent.
Or you may have your eye on an area that has limited available listings, but most homes are owner-occupied and not appealing to renters. These and other considerations must be made when reviewing the number of vacancies and listings for an area.
Rental Management Experts Can Help You Build Your Portfolio
Determining the ideal property for your portfolio may take the insight that the best real property management Baltimore offers! Working with Rentwell means you get insights from property managers who know the community well and can help you maximize ROI. Connect with our team to learn more about our property management services!