Top 10 features of a profitable rental property in Fairbanks Alaska

Fairbanks, Alaska

Looking to purchase and profit from a residential rental property? From the first decision to get into the landlord biz to actually buying a building, the idea may be daunting for the first-time investor. Real estate is a tough business and the field is peppered with land mines that can obliterate your returns. Let’s examine the things you should consider when shopping for an income property.

Starting Your Search
​Although you may want a real estate agent to help you complete the purchase, you should start searching for a property on your own. Having an agent can bring unnecessary pressure to buy before you have found an investment that suits you. The most important thing is to take an unbiased approach to all the properties and neighborhoods within your investing range.

Your investing range will be limited by whether you intend to actively manage the property or hire someone else to manage it. If you intend to actively manage, you should not get a property that’s too far away from where you live. If you are going to get a property management company to look after it for you, proximity will be less of an issue.

Let’s take a look at the top 10 things you should consider when searching for the right rental property.

1. Neighborhood. The quality of the neighborhood in which you buy will influence both the types of tenants you attract and your vacancy rate. For example, if you buy in a neighborhood near a university, the chances are that your pool of potential tenants will be mainly made up of students and that you will face vacancies on a fairly regular basis (i.e., during summer). Be aware that some municipalities attempt to discourage turning homes into rentals in some ‘hoods by imposing exorbitant permit fees and various bureaucratic red tape.

2. Property Taxes. Property taxes are not uniform across an area and, as an investor planning to make money from rent, you want to be aware of how much you will be losing to them. High property taxes may not always be a bad thing if the neighborhood is an excellent place for long-term tenants, but the two do not necessarily go hand in hand. The municipality’s assessment office will have all the tax information on file or you can talk to homeowners within the community. It is also wise to consider the likelihood of property tax hikes in coming years. A town in financial distress may hike taxes far beyond what a landlord can realistically charge in rent.

3. Schools. If you’re dealing with family-sized accommodations, you need a consider the quality of local educational facilities. If a property is good, but the nearby schools are poor or non-existent, it can affect the value of your investment. Although you will be mostly concerned about the monthly cash flow, the overall value of your rental property comes in to play when you eventually sell it.

4. Crime. No one wants to live next door to a hot spot for criminal activity. Go to the police or the public library for accurate crime statistics for various neighborhoods, rather than asking the owner who is hoping to sell the property to you. Items to look for are vandalism rates, serious crimes, petty crimes and recent activity (either up or down). You might also want to ask about the frequency of a police presence in your neighborhood.

5. Job Market. Locations with growing employment opportunities tend to attract more people – meaning more tenants. To find out how a particular area rates, go directly to the U.S. Bureau of Labor Statistics or to your local library. If you notice an announcement for a new major company moving to the area, you can rest assured that workers will flock to the area. However, this may cause house prices to react (either negatively or positively) depending on the corporation moving in. The fallback point here is that if you would like the new corporation in your backyard, your renters probably will too.

6. Amenities. Check the potential neighborhood for current or projected parks, malls, gyms, movie theaters, public transport hubs and all the other perks that attract renters. Cities, and sometimes even particular areas of a city, have loads of promotional literature that will give you an idea of where the best blend of public amenities and private property can be found.

7. Future Development. The municipal planning department will have information on all the new development that is coming or has been zoned into the area. If there are many new apartment buildings, business parks or malls going up, it is probably a good growth area. However, watch out for new developments that could hurt the price of surrounding properties by, for example, causing the loss of an activity-friendly green space. Additional new housing could also provide competition for your property.

8. Number of Listings and Vacancies. If there is an unusually high number of listings for one particular neighborhood, this can either signal a seasonal cycle or a neighborhood that has “gone bad.” Make sure you figure out which it is before you buy in. You should also determine whether you can cover for any seasonal fluctuations in vacancies. Similar to listings, the vacancy rates will give you an idea of how successful you will be at attracting tenants. High vacancy rates force landlords to lower rents in order to attract tenants. Low vacancy rates allow landlords to raise rental rates.

9. Rents. Rental income will be the bread-and-butter of your rental property, so you need to know what the average rent in the area is. If charging the average rent is not going to be enough to cover your mortgage payment, taxes and other expenses, then you have to keep looking. Be sure to research the area well enough to gauge where the area will be headed in the next five years. If you can afford the area now, but major improvements are in store and property taxes are expected to increase, then what could be affordable today may mean bankruptcy later.

10. Natural Disasters. Insurance is another expense that you will have to subtract from your returns, so it is good to know just how much you will need to carry. If an area is prone to earthquakes or flooding, paying for the extra coverage can eat away at your rental income.

WHAT SHOULD I DO NOW?

Contact Cristina Alexander for an Investment property analysis and consultation.
NEXTHOME Arctic Sun, Fairbanks, Alaska 907 987-6897
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