When you’re looking for an investment property – especially your first one – a lot of factors should go into your decision. Here are 5 things you should look for in an investment property.
Location, location, location
It’s a cliché for a reason. The right location will help you get a higher return on your investment. While a cheap home in a less than ideal location may be appealing, it can ultimately create a lot of problems. A desirable location will attract more potential renters and bring in a higher amount of rent.
Make sure you research the exact location where you plan to invest thoroughly. You’ll want to look into the school districts, neighborhood amenities, and crime in the area. Neighborhoods can vary greatly within the same zip code, so make sure you know exactly where your property is located.
Be logical, not emotional
You may love a property, but that doesn’t mean it’s the right purchase. When looking for an investment property, make sure you go by numbers, not emotions. You need to factor in costs of future maintenance, property taxes, and any mortgage payments. A high-priced unit with high rent may sound appealing, but it may also sit on the market longer. A low-priced unit with low rent may be enticing, but it could draw less than ideal tenants. Many times, middle of the road the best thing to look for in an investment property.
Look for low maintenance
A home in good condition not only saves you a headache, it’s also great for your tenants. Tenants who don’t have to regularly request maintenance are more likely to renew their leases. Repairs can also greatly lower your return on investment. Even if you hire a property manager to maintain your property, you’ll still be on the hook for any repair bills.
Think of your future tenants
A practical home is more likely to attract multiple potential renters. While a unique property may initially get interest, if the features of the home are too unique, potential tenants may be turned off. Families will be looking for multiple bedrooms and bathrooms in great school districts, while young couples may prefer an open layout that works for entertaining. What is the demographic in the area you are looking to invest in? Students, single adults, empty nesters, and people with kids all have different needs and desires in a rental.
Look towards the future
One day, you will more than likely want to sell your investment property. Ideally, your property should appreciate in value over the years. Up and coming areas may be less expensive to purchase in initially, but could sell for significantly higher later on down the road. You can also increase the appreciation potential when you first purchase by making minor repairs and cosmetic updates.
Ultimately, only you can decide which property is right for you and your goals. Hopefully these tips have helped making that decision a bit easier.