Are you thinking of investing in an investment property to grow your savings? If so, you’ve probably realized that they aren’t all created equal. Some properties will no doubt return less than stellar returns on your initial investment, while others may make you rich beyond your wildest dreams.
The trick is knowing how to spot the good ones from the bad ones…before you spend all that money! If you are new to the world of real estate investing and aren’t sure where to begin when it comes to identifying properties that will reward your efforts in the long run, we have some tips for you.
From contractors to condominium associations and everything in between, there are plenty of things to keep in mind before buying an investment property.
Due Diligence Is Key
When buying an investment property, you need to know everything there is to know about the deal. Review the seller’s disclosure of any issues that may be present. If you’re buying from a bank, be sure to request that they send you the full list of repairs that are needed to ensure a full repair estimate for you.
Most importantly, hire a reputable contractor to come out and inspect the property for you. You want to catch any potential issues as soon as possible so that you know how much they’ll cost to fix. In addition, you can also get a second contractor to provide a second opinion. The cost of this is nominal when compared to the cost of a surprise repair.
If You’re Buying A Condo
Before you commit to buy a condo, it’s important to understand the condo association and the fees you’ll have to pay as a member. For example, are they increasing their fees soon? Do they have enough funds in their reserves to cover unexpected repairs? Does the condo board seem to be actively managing the building or are they falling behind?
These are all things you’ll want to know before buying into a property. Again, they may or may not have their finances in order, but the more you know ahead of time, the better prepared you’ll be. If the condo association is unresponsive or difficult to communicate with, this may be a sign that there are underlying problems. Again, you may not be able to discover all the issues, but you can attempt to gauge how well the board is handling their responsibilities.
Check Out the Rental Property Location
There are a variety of factors to keep in mind when considering the location of your property. How close is it to amenities like grocery stores, public transportation, fitness centers, dining and more? Is the neighborhood safe and friendly? What is the area’s average rental rate?
All these things will have a significant impact on the amount of money you are able to charge for rent and how quickly you’ll be able to fill your vacancy. If you’re buying in a popular area, you’ll likely have more options when it comes to renting your property. Similarly, the rental rates in these areas are generally higher.
If the property is in a less desirable part of town, you may be able to purchase the property for less and charge lower rental rates. In this case, you could recoup your initial investment more quickly, but it’s important to consider how that may impact the number of applicants.
Look For Repairs That Are Currently Necessary
Before you buy, you’ll want to make sure that any necessary repairs are minor. It can be tempting to buy a property that needs a few repairs because it will likely be cheaper than a similar property that is in great condition.
However, if there are major repairs that need to be completed, you’ll need to take this into account when figuring out how much money you’ll be able to charge for rent. It’s best to find a property in good condition. When purchasing a property in need of repairs, be sure to add those repairs into your budget when figuring out how much money you’ll need to make the purchase. This will help you avoid the risk of overspending.
Existing Renovations and Upcoming Developments
If you’re buying a property that has been recently renovated or is near a development project, the property’s value is likely to increase over time. This can be a helpful thing if you plan on holding the property for a few years before selling. However, it’s important to keep in mind that these renovations and developments can also increase the cost of your mortgage and insurance.
This means you’ll have to factor the additional cost into your monthly budget. If you’re buying a property that is near a development project, you’ll want to keep an eye on the progress. If construction takes longer than expected, you could be negatively impacted by noise, dust, and other factors. If you’re buying a property that has already undergone significant renovations, it’s important to find out why they were done. If the renovations were done because of a repair that was necessary, this could either be a positive or a negative thing depending on the repairs were done.
How Many People Are Currently Living In The Investment Property?
If you’re buying a multi-unit building, you’ll want to find out the current rental rate for each unit. You’ll also want to know how many people are currently living in each unit. This will help you to determine how much you’ll be able to charge for rent. If you’re buying a building with a very low rental rate, you may want to reconsider buying that building. If you’re buying a building with a lower rental rate, you may be able to charge a lower rental rate and still be able to turn a profit. Alternatively, you may be able to find a way to increase the rental rate so that you’re still able to turn a profit while charging a relatively low rental rate.
When buying an investment property, it’s important to do your due diligence. This will help you to find a property that will become a worthwhile moneymaker. When buying an investment property, it’s important to keep in mind the tips above.
When buying an investment property, it’s important to do your due diligence and find a property that will become a worthwhile moneymaker. With these tips in mind, you’ll be well on your way to buying an investment property that will reward your efforts in the long run.
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