7 FACTORS TO CONSIDER BEFORE INVESTING IN INVESTMENT PROPERTIES
Purchasing an investment property is one of the smartest financial decisions you can make. With the national?median rent increasing by 11.4%?in 2021, you can be assured of passive income for generations.
But do you know you are not guaranteed these returns on investment properties?
To reap big, you need to think strategically when picking and buying your investment property. Also, check on general guidelines and real estate market trends to determine the viability of your investment. You’ve got a lot to consider and a lot on the line, too; you can’t afford a mistake.
Whether you plan to buy a commercial, residential or mixed-use investment property, know what consists of a good purchase.
It’s normal to feel overwhelmed with lots of information and details you ought to know, but it’s worth it in the end.
Are you wondering what you need to consider before investing in property? Here are 7 key factors to consider before buying an investment property.
1. The Type of Property
The utmost consideration in property investing is determining the right type of property. Do you need commercial rental property, vacation rentals, apartment buildings, townhouses, or condos to rent? Depending on your budget, preference, and intended returns, not every type of investment property will suit you.
It’s crucial to analyze all the benefits and drawbacks of each type of investment property on your list with a critical eye. Carry out market research to know the investment properties with high demand. Is the current demand trend expected to increase or decrease in the future?
Remember, while one investment property may reap great returns in one market, this may be the opposite in another market. Choosing the right type of investment property is key to a successful investment.
2. Check on Budget
How much are you willing to spend on?real estate investment? Before you even consider buying an investment property, you need to have a budget. While the budget helps you pinpoint the type of property within your range, it narrows down your options in terms of location and space.
According to your budget, determine if you can afford combinative villas, duplex apartments, beach houses, or a town condo. Be straightforward on the amount you wish to spend on the investment. If you seek external funding, make all the necessary arrangements to confirm you qualify for the financing.
When developing a budget, don’t forget to include extra expenses and other hidden costs. This includes property taxes, realtors’ fees, and even renovation costs to get the property ready to rent out.
3. Consider the Location
When investing in investment properties, location matters. Remember, the location will impact other factors, such as the type of property and your budget.
Of course, you can’t invest in stunning vacation rentals in a deserted neighborhood without any vacationers, can you? Or maybe purchase a rental apartment building in a location without any rental housing demand.
Also, the location you choose will determine the price. The price of properties in areas with high housing competition is likely to be high than that of less competitive markets. When developing your budget, also consider the preferred location for your investment.
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The rule of thumb; don’t buy the right property in the wrong location.
4. Investment Purpose
What do you plan to do with the?investment property?you are buying? This makes a huge difference in both location and type of property to buy.
If you are thinking of turning the property into an office building, you might consider one located in a busy place. If it’s for industrial purposes, then it needs to have a bigger space.
Knowing the purpose of your purchase guides you to make the right decision. Also, it can help you to narrow down your options to suit your specific needs.
5. Investment Properties Value
How much is the estimated value of the property you are about to buy?
Knowing the estimated value helps to determine if the investment you are about to make is worth it. With an estimated value of the property, you can also make plans accordingly, such as looking for adequate financing.
However, don’t opt for the cheapest property you come across. It might be you will end up spending hundreds of thousands of dollars to renovate and restore the property to make it habitable. If necessary, find a property appraisal that can help determine if the estimated value is the correct figure.
6. Return on Investment
You are buying the property purposely for investment purposes, right? If so, the expected return is a key consideration. Determine the expected profits to make the right choice of investment.
Also, as a property investor, you want to be keen on the appreciation of the property. You want to know whether the property will grow in value just in case you decide to sell it in the future.
7. Real Estate Laws
Prior to making the huge investment, be familiar with the real estate laws of where you plan to purchase the property. This also involves the amount of taxes you will be paying for the property.
Considering the complexity of real estate laws and your tight schedule to go through them all, consider hiring a local real estate lawyer. They are adept with all real estate laws, and they will hold your hand through the necessary procedures and processes. This helps to avoid paying heavy penalties for going against the law.
Courtesy: memphisinvestmentproperties