While a good investment property has the power to generate passive income for decades, not all investment opportunities represent a wise use of your time and capital. Purchasing a problem-laden property in an unprofitable area can deal a major blow to your finances and leave you stricken with buyer’s remorse. So, before committing to purchase an investment property, make sure to do your homework and gather up as much pertinent information as possible.
The Location is Extremely Favorable
Location should be foremost on your mind when seeking out prospective investment properties. As many seasoned investors can attest, a desirable location can effectively make up for certain shortcomings on the part of the property. For example, a property that’s rife with modern amenities and free space in an undesirable location is likely to generate much smaller returns than a property that’s amenity-light and lacking in space if the latter is found in an area with robust demand for housing.
So, while the property itself is certainly important, location should be among your biggest concerns. In your efforts to determine a location’s overall desirability, you’ll need to consider a variety of factors – with local property values, population size, growth rate, rent prices and general safety chief among them. Taking the time to engage in proper location research will increase your chances of making a smart, well-informed decision and effectively diminish your chances of being hit with buyer’s remorse. So, if you’re currently wondering, “Is it a good time to invest in real estate?,” the answer is likely to be yes if you limit yourself to properties in desirable locales.
The Property is in Good Condition
You should never commit to purchasing an investment property that hasn’t been thoroughly inspected. In addition to doing multiple walkthroughs of the property, you’ll also need to enlist the services of a certified home inspector. No matter how meticulous you are in looking the place over, a seasoned pro is necessary for determining the property’s true condition. A professional inspection may also be required for buying the best home insurance.
As an investor, it’s in your best interest to know exactly what you’re getting when purchasing a new property, and a knowledgeable home inspector can help ensure that you have all the information needed to make an appropriate offer. Once they’ve gone over the property and presented you with their findings, you can amend your offer to reflect the cost of any repairs or renovations the inspector has deemed necessary.
Of course, not every seller is going to be equally amenable to this – or allowing inspections to occur in the first place. Should you encounter such a seller, take care to stand your ground and make it clear that no inspection means no sale. Any seller who’s fully confident in the condition of their property has no reason to refuse an inspection, and an apprehension towards inspections is often an indication that a seller is actively attempting to hide problems. Just remember – accurately assessing a property’s condition and overall worth requires a professional inspection.
Be Aware of Repair/Renovation Costs
Getting a grasp on repair/renovation costs is among the most important reasons to have a property professionally inspected in advance of purchasing. Although many investment properties require repairs/renovations, some require far more work – and therefore far more capital – than others. To ensure that you have a solid idea of how you can expect to spend, obtain contractor estimates for any repairs/renovations a certified home inspector deems necessary.
Once you have the relevant estimates, you can either present them to the seller and request that the price of the property be lowered accordingly or simply walk away from the deal. After all, even if the seller agrees to deduct the repair/renovation costs from their asking price, you may not want to invest in a property that requires a considerable amount of work.
At the End of The Day
If this is your first foray into real estate, it’s easy to see why you might assume that all investment properties are able to generate sizable returns. However, as any experienced investor can attest, this is far from the case. In fact, certain properties are far more likely to drain your financial resources than bolster them. As such, anyone currently on the hunt for their first investment property would do well to consider the factors discussed above.
