There are some key things to look for in a great investment property. Check out this article about buying the right investment property.
The world of the internet is a double edged sword. It offers a great source for a variety of information. This can be both good and bad. With so much information at your fingertips and so much to look through, how do real estate investors know when they see a good opportunity or one that simply looks good on paper?
Having personally invested in real estate for over 35 years and having worked within the real estate industry for the past 20 years, I have identified a number of things that a property must have to insure it is a safe and sustainable investment.
7 Things to Look for in a Great Investment
1. Location for sustainability: As you know, location is paramount to real estate. To the investor it has a different meaning than to a home buyer (What does location mean to the investor). Buying a property in emerging markets that are poised for long term sustainable growth is the most important factor for you to reap the highest returns for the duration of ownership.
2. Undervalued markets: When you are buying a long term hold property, you want to insure you have a property that can provide consistent and growing rental returns year after year. You also want to insure the value appreciates long term. One way to do this is to buy property in undervalued markets. Undervalued markets are essentially markets where the median price home can be purchased for less than 1/3 the median income in an area. For example, places like the Atlanta market today is considered the most undervalued market, taking only about 20% of the median income to make a home purchase. This helps to insure equity growth and because you buy the property inexpensively the rental returns are also going to be stronger.
3. Controllable expenses: Properties such as condos and townhomes have expenses that are controlled by the HOA. These fees can change without notice and are going to directly cut into your profits. What starts out as a great investment may change into a not so great investment without you having any say in it. When you invest, investing in property such as a single family property where you have maximum controls over the expenses will reap you better long term returns.
4. Predictable returns: You will want the property you buy to be predictable in terms of expenses. For example, old and tired properties are cheap to buy and often show better returns on paper. The unpredictable repairs that often arise from these unforeseen expenses can suddenly take cash flow properties into a negative cash flow (or reduced cash flow position). When you buy newer or recently renovated properties, you will have more predictability to your TRUE long term returns.
5. Highly sought after property: To keep good tenants who will renew their leases and also to have a property that you can sell easily, you want properties that are in highly sought after areas. Each market and each tenant demographic may be different. For example, if your property is near the inner city and your tenant demographic is the millennials (younger working class adults), you will want property near entertainment and employment. If your demographic is the baby boomer then suburban living may be best. Any local realtor can help establish what is the most highly sought after property class in your chosen market place.
6. Value Play: Not necessarily a requirement but certainly adding to the value of a property for accelerated equity growth is a property with a value play. Properties such as nice properties that sell cheap because they are dated or in need of repair (not to be confused with tired out property that need unpredictable amounts of renovation). This is when you can increase the value of a property with cosmetic type of repair or perhaps create an additional bedroom by converting a bonus room or very large room you may be able to add a quick value.
7. Awesome exit strategies: Similar to the highly sought after property is the liquidity of the property. For most investors looking to hold a property long term for cash flow and equity growth, they want a property that will be representative of the most liquid investment class. This is typically a single family home with at least 3 bedrooms, 2 bathrooms and a 2 car garage. This is a product that appeals to the largest audience of buyers. When you acquire property in this highest demand class of properties in the best areas you will attract a retail buyer.
You can find investment property in any city U.S.A. to purchase. Finding property with the above mentioned attributes will help insure you have an investment that will be less likely influenced by rapidly changing market demographics and economic uncertainties, when you find these properties they will provide you with long term sustainable returns.
Don’t want to do all that hard work? Find out about the Turnkey Real Estate Investing Properties that we have already vetted and know are a great investment!