You don’t need to be an experienced investor with deep pockets to make money in real estate. In fact, some of the most successful investors started out with small and simple portfolios. How invested you become depends on your long term strategy and the amount of time and money you are willing to commit. If you have considered buying an investment property, it’s important to know that your options are endless. Here are four questions you should ask before you make your first purchase:
What makes this location ideal for rental marketability?
People rent for different reasons. Some are university grads looking to establish themselves in a city prior to becoming homeowners. Some renters are simply looking for an affordable Airbnb stop along the way. While short term rentals require a little more hands-on involvement, they can be incredibly lucrative. If you have a specific property in mind, try to get some information on the typical renter profile that you could expect to stay in your home. Homes in remote areas or small towns may look attractive from a purchase price standpoint, but you don’t want to be stuck with a vacant property because of low rental demand in the area.
Related: Investing in the Right Neighbourhood
What are the rental properties like in the surrounding area?
Knowing your competition is one of the most important considerations when choosing an investment property. How much are comparable properties renting for? Is the vacancy rate high or low? What condition are the other accommodations in, and how will your property compare? Much like home buyers, potential tenants are doing plenty of research online before making a decision, and they have a better perception of value than ever before. Online resources such as Mashvisor will allow you to view properties nearby and get an idea of what potential renters are expecting.
Is the home in good condition, or does it have potential for a reasonable cost?
Regardless of which market you are interested in, nice homes generally attract nice tenants. Good quality tenants will take pride in your place, but you need to give them something to be proud of. If the property you are interested in is dated or requires some cosmetic updates, don’t be afraid to roll up your sleeves. Finishes don’t need to be fancy. Choose durable flooring and cabinets. A clean income property will attract the right kind of tenants to occupy your home.
Related: Buying Your First Rental Property
Is this neighborhood headed in the right direction?
Most real estate investors have a long term plan in mind, but you never know when your plans might change. It’s always wise to choose an investment property in a neighborhood that is likely to appreciate. Look for historical sales data and drive around the area to observe the condition of the surrounding homes. Good signs of an appreciating neighborhood are decreasing crime statistics, plenty of employment opportunities nearby, and surrounding homes that display pride of ownership. Expect to pay a premium if you’re thinking of buying a home in a major city or vacation destination, but your additional rental income will make your investment well worthwhile.
Investors: What strategy has worked best for you; long-term or short-term investing? Leave a comment, and let’s chat!
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