There are five questions you should ask before buying an investment property. They all focus on that old real estate principle of location, location, location!
Ask yourself before choosing an investment property: Is this the best location to purchase an investment property?
I say it daily but it bears repeating. Investment property is all about location. You should not look at any properties with out first KNOWING you are looking in the best location. A location that has job growth, population growth and area that is undervalued can sustain growth and cash flow.
Here are the five questions you should ask before buying an investment property:
1. Does the area provide for low taxes and insurance with Baby Boomer appeal? Yes, I know there are a number of questions right here in the first question (and I have only just begun) but the question of being in the best location is an incredibly important one and should be the one you spend the most time on.
2. Where is the path of progress? Once you identify the best city for you, are you looking for property within the path of progress? In other words, which direction is the city growing? If the city is growing to the north corner because a new Toyota plant just opened, then all your commercial builders are adding strip malls and gas stations, etc.. Therefore, this is where jobs are heading and where everyone wants to be. If you purchase in the south end of town, you may lose your anticipated growth.
3. What is the workability score? This may be confusing but think of it this way: What is nearby that would attract an end user to want to live here? If you are investing for future growth, you will have an exit strategy where you will sell a house to a retail buyer. This retail buyer will want shopping and movie theaters and schools nearby. When an end buyer has everything they want nearby, they are willing to pay full retail. To get the capital growth you are looking for, and to fully know your exit strategy is solid, it is imperative that you consider all these factors.
4. Why do you considered this property be the best cash flow property? OK, now you can look into the property itself: The structure, the condition and the shelf life of the roof and heating and air and all that stuff. (Yes, for purposeful investors this is the fourth concern on the list.) With all this considered does the property generate the cash flow you are looking for?
5. Do you have access to GREAT property management? Every investor knows the return on investment is made or broken based on the property manager. You want to have options and want to interview the property management thoroughly. No second best is acceptable here. This is your financial portfolio, so choose wisely.
The road to buying an investment property is, and should be, paved with many questions. Do the hard work before you invest – think location – and you will improve your chances of success. For more information on real estate investing, contact the Equity Builders Group at 941-718-7761.