Investing in real estate is a hobby and profession for many Americans and its increasing popularity has caused quite the stir in the media. There are many people who buy investment properties to rent out, to flip, and some even to simply sit on it while it increases in value.
It doesn’t matter what you intend to do with your land or house, the most important thing about investing is buying the right property. This article is here to help you start to understand the fundamentals of choosing a good property. Now, we can’t teach you everything there is to know about choosing investment properties, nor can we give you a magic formula on how to pick the most profitable investment, we can only give you some basics to help springboard your study of investing in real estate. By no means is this intended to be a comprehensive list of instructions.
In this article we will look at to parts of choosing a real estate investment property: 1) What to consider before you buy real estate, and 2) what to look for in a good property.
Before You Buy:
Can I do this?
Whether or not you have the ability to buy an investment property is a personal question, but nonetheless is one that needs to be asked. Obviously the ability to purchase a property largely lands in the realm of finances, but there are also emotional things that need to be considered as well. You need to be sure that you have the emotional capital as well as the money to buy an investment property. It is important to ask this because taking on an investment property can be very stressful. It can take time out of your week that you may not have considered and if the property starts to lose money you will have to keep a level head to get out of the situation and back into the black.
What do I want to accomplish?
First things first, you need to have a game plan. What kind of investment property are you looking for? Are you looking for a home to flip, a rental property, or just something to sit on? Once you know what kind of investment you are looking for you need to ask yourself how much you want to make on the property. Then you need to ask yourself how much you are willing to lose on this property, because even the best laid plans can go awry. Lastly, you need to figure out how you are going to do it. Study as much as you can about making a real estate investment plan, because the more detailed and well thought through your plan is, the better chance your property will have to succeed.
What makes a property good for an investment?
You may have heard the old saying, “location, location, location”. Well, when it comes to real estate, that is the most important factor. Even if you find a steal of a deal on a property it will be worthless if it is in a bad neighborhood. The best way to tell if the location is good is to ask yourself if you would live or do business there. If the answer is yes, then you may have a winner. However, if the answer is no, you should reconsider buying it.
What’s close by?
Amenities always go hand-in-hand with location and are a key part of the selection process of a real estate investment. The more amenities there are, the more likely someone will want to live there. This is another point where you need to ask yourself, “Would I want to live or work here?” the answer to that question will help you know if it is a good investment. For most people amenities like schools, department stores, libraries, pools, and parks are the first priority when looking for amenities. The more of these there are the more likely someone is to buy. However, if you are looking at mountainous properties or properties that are in rural areas you may want to consider looking for amenities like lakes, rivers, and leisure trails.
Because location is such a vital part of real estate investment, it may be a good idea to start your search with a map. That way you can easily eliminate property in areas that you personally would not want to live or do business. Our website, BuyBoiseRealEstate.com, has a feature where you can do just that. On the search by map function, you can draw outlines of the places where you want to search and the website will only show you what is within that boundary.
How much will it cost?
Making sure that you can afford the sticker price of a home is one thing, it’s another to find out if you can afford the cost of maintaining it on a monthly basis. Two things to keep in mind are a) property tax and b) utilities. If the water, sewer, trash, electricity, and gas bills of a property outweigh your revenue, then you will only lose money on it. It’s important to take the time to look into how much it costs to occupy or own that space. If you can, find out how much all the utilities cost each month for at least 2 if not 3 years. That way you can have a good estimate on its monthly costs.
What is the vacancy rate?
Is the property you are looking at the only one in the neighborhood up for sale? Or are there others? This is an important question to ask because neighborhoods with only a lot of vacant homes may be unpleasant and undesirable to live in. Steer clear of neighborhoods where there are a lot of homes on the market, unless it is a new development, so you can have a higher chance of making money on your property.
Is the property in a place prone to natural disasters?
If the property you are eyeing is built on a hundred year floodplain, consider looking elsewhere. It would be a shame to buy a property just to have it destroyed by a flood a few years down the road.
Remember, these are only part of the vast topic of real estate investing. Make sure that you do more research until you are comfortable before you start looking for property. Look online for more information, or just contact one of our spectacular agents.