Things to Consider When Buying A Residential Investment Property

Are you planning to strengthen your investment portfolio with some investment property? Buying, fixing, and renting property is not always as cut and dry as it seems. Many investors find great deals, only to find themselves struggling to keep tenants and to effectively manage the property. What should you consider before you go out and purchase an investment property? Here are some Keyrenter tips to help you make a smart real estate purchasing decision.

investment property

Tip # 1 – What is the Condition of the Property?

Buying an older home might seem like a great idea until you see all the work you need to do. You need to do your due diligence and find a property that will be able to be worth something when you are done. Whether you plan to flip and resell it for a higher rate or you want to attract some renters, making sure you have invested research time into the property will go a long way in helping you select the right place to purchase. Be honest with yourself as you look at fixer-upper properties to know what you are capable of renovating and how much it would cost to make the place shine again.

 

Tip # 2 – Know the Area

As you research different properties, become familiar with the area and what type of neighborhoods are around. Are there schools nearby? Look into the schools and find ones that are well-ranked as those rental homes can attract people seeking to send their children to a nicer school. Consider how easy it is for you to get around the property. Can you easily make it to convenience stores, gas stations, and freeways in a timely manner? Highly populated areas can pose a challenge to attracting quality tenants as the traffic and excessive amount of people can drive some away.

 

Tip # 3 – Will It Make Money?

Several investors agree that a rental property is only valuable if it will be able to bring in 1% of the overall cost. For example, if you purchase a home costing $100,000, you will charge rent of $1,000 a month or more to pay for the costs of the home. If you cannot get your figures to meet the 1% rule, you need to consider a different neighborhood. Chances are you have people moving in and out of the area, or the neighborhood is shifting cost-wise, making it difficult to make a profit.

 

Tip # 4 – Taxes

You need to consider property taxes when purchasing an investment property. High taxes will take away from your profits, whereas low taxes will allow you to maintain a larger volume of your rental income each month. Plan on seeing higher taxes in metropolitan areas where you can see a lower rate in rural areas. You need to check with a tax assessor if you are concerned about the property taxes. Even if it is a great deal, the taxes on the property could steal away your ability to make decent money on the home.

 

Tip # 5 – Insurance Costs

When you are looking into another property, you need to consider insurance costs. How much will it cost you monthly to insure the property? If you want to have tenants, that insurance rate will increase as other people do mean a higher risk to the property. Insurance costs can take a profitable home into a money pit.

 

Tip # 6 – Unexpected Costs

There is no telling what tomorrow will bring. Do you have money to pay for the unexpected? You need to look at things that could cost you money like crime in the neighborhood, common weather-related issues, and more.

 

Tip # 7 – Curb Appeal

People notice every detail about a property when they are seeking to rent. You need to look for a neighborhood that has excellent curb appeal. Go through the neighborhood to see how the people care for their homes. Do they have well-manicured lawns? Are the homes painted nicely and well-kept? An attractive investment property will go a long way to keeping tenants on the property and allowing you to charge a fair rent that allows you to make money.

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