For decades, property investment has been an excellent solution for people who want to solidify and enhance their financial future. Investing in the right property yields a great return on investment and with the rental rates skyrocketing across the country, you’d be bonkers not to cash in on this hot (and provenly profitable) investment trend.
Here are 4 great tips that will provide some clarification on the investment process and give you the momentum you need to acquire a profitable investment property.
#1 – Learn What Makes A Good Investment Property
Not every property is going to deliver a positive outcome. Some, no matter how beautiful or newly built, are just destined to fail. You can avoid this situation altogether by knowing what makes a good investment property.
Factors to consider when evaluating a prospective investment property:
- Appreciation: Will this property value rise? How much so overtime? What costs will the investor endure to ensure appreciation?
- Cash Flow: When rented, will the income generated exceed expenses?
- Principal Reduction: If you use a loan to acquire the property, how long will it take you to actually own the property? How will a tenant’s monthly payment affect the loan?
- Property Taxes: How much money will you be losing to taxes? Are higher taxes justifiable if the property resides in a good neighborhood?
#2 – Do Your Research
Chances are, if you’re new to the real estate investment game, you won’t actually have the knowledge you need to properly utilize the factors listed above. However by doing your own research, educating yourself about the real estate market in your area, and talking to other homeowners, you can easily gauge what property will be the most sound investment for you. For example, a commercial real estate investment may not be ideal for a first time investor. Or, a single-family condominium, may not yield the results a seasoned investor has anticipated.
#3 – Seek Professional Advice
Once you feel confident, and have narrowed down a couple of promising properties, it is always recommended to seek the advice of a real estate broker. Yes, the internet is a glorious thing. It can provide you with all of the information in the world. But if that information is not relevant or not even closely accurate, you run the risk of investing in a dud. Seeking the advice of a broker BEFORE you begin composing your list of properties is always a good idea too. They can answer your “first-time-investor” questions, lead you in the right direction, and assist in your evaluation. Professional advice plus your own research? Now that’s the formula to success!
#4 – Decide On Management And Upkeep Before You Buy
REALITY CHECK: this newly acquired property will need to be managed and maintained. If you plan to rent it out, you need a tenant screening process in place, a way to collect rent, an escrow account for the security deposit, a quick maintenance solution, etc. Luckily, by deciding who will manage and maintain the property before purchase, you can eliminate properties that will require a lot of maintenance and out-of-pocket costs and instead choose a property that will align with your personal management preferences. Some people take comfort in managing and maintaining the property themselves. For the rest of us, solace is found in the form of a property management company.
So what are you waiting for? Get searching, researching, and asking. The profitable property investment of your dreams is out there, waiting to be found!