Factors To Consider Before Venturing Into Buy And Hold Real Estate Investment Strategy
There are many active real estate investment strategies that you can follow while planning to invest in real estate properties and ‘buy and hold’ is one among them. As a real estate agent in North Carolina, we share the details of some of the important things that you need to consider for your long-term investment plan.
Appreciation Rate Of The Property
Property appreciation rates are one of the early indicators of a strong real estate market. You will have to find a reliable annual increase in the values of investment property, enabling you to sell the property for a larger price.
A decrease in population also caused a decline in the prices of real estate properties. With fewer residents, tax receipts will go down, impacting the infrastructure, quality of education and public safety. Like property appreciation rates, you have to find consistent increases in population rates before purchasing an investment property.
Property taxes have a strong impact on the revenue of a Buy and Hold investment. You will have to avoid markets with excessive taxes. Keep in mind that regularly increasing property taxes will keep on increasing. A city that keeps on increasing taxes may not be the most well-managed one. Periodically, a specific part of real estate can have a very high tax evaluation. For instance, if real estate in North Carolina has a very high tax evaluation, a tax appeal business can take the situation to the county for examination and a possible markdown in tax assessment.
Price To Rent Ratio
The price-to-rent ratio equals the median property price divided by the yearly median gross rent. An area with high lease prices will have a low price-to-rent ratio. However, if the price-to-rent ratios are very low, rental rates can be higher than house payments for housing units that are similar. Therefore, you need to search for communities with a price-to-rent ratio that is moderately low, not a high one.
Median Population Age
The median age of the residents can show if the area has a reliable labor pool, signaling potential renters. If the median age reflects the workforce of the area, you will have a stable pool of tenants. An unacceptably high median age can predict increased imminent pressure on public services with a declining tax base.
Diversity Of Employment Industry
The job of the area that you are planning to invest in should not be concentrated in very few employers. The community should have a different combination of industries, thereby avoiding an interruption or dropoff in business for a single business category from affecting other industries in the area.