As an investor in the Ashburn, VA area, you always have your eye out for a good investment opportunity—even during a crisis. Looking at the future of rental property in the area, there’s definitely potential here in this part of Northern Virginia!
As professional providers of Ashburn property management, we know that when you're selecting a new investment property, it's crucial to consider more than the current market. Ashburn is poised to see significant growth and a boom in residents seeking housing in the wake of Virginia Tech's new Innovation Campus. With its proximity to the Amazon HQ2 deal heading to Arlington, there are incentives for investors to put down roots in Northern Virginia.
As is true with any business venture, there are good investments and bad ones. To capitalize on your investment, you want to find great spaces that will lead to lasting returns. This isn’t always easy because not every property on the market will make for a great rental space; some are best for a residential home—or not at all.
Whether you’ve been an investor for a short time or a long while, you may have had some of your rental investments turn sour. You may have wondered, "What went wrong?" Or "Why didn’t the investment turn out the way I thought it would?" Sometimes, it's easy to get caught up in a property that you believe will yield a good profit—but is secretly an investing lemon.
How can you tell if an Ashburn property has the potential to become a great space? Here are just a few of the figures we suggest considering as an expert in Ashburn property management.
Considering the One Percent Rule
While the One Percent Rule isn't the final say in whether or not you should invest with property values the way they are today, it is a common denominator among investors when considering the ROI any property has to offer.
This rule simply states if a property costs more than one percent of the income you can generate from it monthly, then it's a much riskier investment. This doesn’t take into consideration the expenses you may have, such as taxes and insurance. So, for example, if a house is listed for $200,000, then that property is a secure investment if you can comfortably receive $2,000 a month in rent. The thinking is that any less than that could cut too deeply into your lasting returns.
Given the current market in the Ashburn area, you have to take this "rule" with a grain of salt, not as your sole determinant when selecting a property. Without evaluating the property further, you may end up walking into a money pit if you find a potential rental based solely on these parameters.
The Cap Formula
There’s another formula that you can follow to ensure you will make a profitable decision; it’s called the cap rate rule. With this rule, you determine the cap rate by dividing the net income generated by the house by the asset cost.
First, you have to determine the net income. This will be the amount you charge for rent minus any expenses, such as taxes, insurance, repairs, and so on. So, for example, if you have a house that is getting $3,500 a month for rent and the expenses are $1000 a month, then the net income is $2,500. Now, multiply this by 12 for the annual net income. You will have $30,000.
Your next step is to divide the net income by the asset. So, if you paid $490,000 for the house, you would end up with roughly six percent as your return. You have to determine whether this is a good enough amount for you or not. If you feel that the area is booming and this supports your long-term investment goals, then it is a reasonable return rate.
As the experts in Ashburn property management, we also suggest you consider the flip side of the coin. Where you foresee an economic downturn, then it may not be the best investment for you. Ultimately, your renters drive your lasting returns: even if you have a great space to offer, there must be great people demanding it.
Just like the One Percent Rule, your cap rate is less of a decision-defining tool and more an approximation. However, it can help give you some direction when trying to choose between multiple properties.
A Home—or a Rental? Know the Difference
Some properties make great homes. They may check off all the boxes for everything you’ve always wanted in a house. This may lead you to believe that it would make a great rental, too. However, not every great residential home makes a good rental investment. You need to know the difference—but it's not always easy to tell. As the experts in Ashburn property management, we stress the importance of learning this skill.
For one thing, purchasing a home to live in is a long-term, personal investment. You don’t need to worry about making a profit from your home, so there's not as much emphasis on your returns or costs. Additionally, your home can be tailored to your tastes—rather than what might appeal to your renters. The two are often startlingly different—and when your bias gets in the way of your lasting returns, you need a professional property manager to help you find the right property pick.
Ashburn Property Management Protects Your Portfolio
If you want to be successful in getting the best investment properties without all the hassles and headaches, then the wisest move is to hire a professional Ashburn property management company. Working with a property manager will ensure you find the best investment properties because we know the market firsthand.
A great place to start is by connecting with RentSimple! We’ll provide a professional Rental Analysis of the properties you’re considering—for free! Our expert property managers know that market analysis is the best way to help determine a viable investment.
With our expertise working for you, you’ll know the best options the market can provide to build and grow your property portfolio. We’ll even put our powerful Rental Analysis research to work for your existing properties, too! Let us show you how "Great Spaces + Great People = Lasting Returns!"