Are you considering buying a piece of property as an investment? If so, you want to get the best ROI possible. In today's hot seller's market, it's especially important to do your homework before closing your deal. That means doing thorough research about the property you intend to buy to be sure that you don't pay more than it's actual worth or overlook some crucial features of the property (or the lack thereof). Below are some things to keep in mind when seeking an investment property to purchase.
Location, Location, Location
Where your prospective property is situated matters greatly on several levels. It should be affordable and within your budget. Keep in mind that cheaper properties located in potentially sketchy neighborhoods tend to attract less desirable residents.
The last thing you need is to buy a house or apartment building in a crime-ridden area. Its price might seem ideal for your budget, but if future residents are put off by its proximity to the criminal element, you could go broke waiting for those units to fill. Location is often the secret to making your rental property work for you!
What About Zoning?
Learn about the zoning status of the property before you commit to a seller. Typically, families with young children are drawn to homes that are in residential zones because that environment is perceived as a safer place to rear their children.
But college students and 20-somethings may prefer an edgier urban location with mixed zoning so they can walk or ride bikes to the campus or when they head out to trendy local nightspots. Also, units that have easy access to reliable public transit systems don't usually stay vacant very long.
Consider Your Property Tax Burden
Annual property taxes can take a big bite out of your profit margin. Make sure that the properties you consider buying don't have exorbitant tax rates or you could fail to turn a profit.
Competitive Rental Rates and Policies
Find out what comparable housing units around town charge for rent. You don't want to lowball your rental fees, but neither do you want to price yourself out of the market.
You can also sweeten the deal by offering special rates to residents in the demographic groups you want to target, e.g., students, seniors, law enforcement officers and first responders. Supplying free WiFi and cable or access to an on-site business center can distinguish your property from others in the area.
Is the Economy Trending Up or Down?
Your research can tell you a lot about the current and future economic status of a town or neighborhood. Confirming that a major employer is set to break ground in the city where your investment property is located can boost occupancy rates considerably.
The reverse is true as well. Do a little digging to confirm if any rumors of factory closures are true. Weigh the pros and cons carefully before sinking your money into properties located in economically distressed areas.
Is the Property in a Good School District?
To attract stable residents as long-term renters, look for investment properties within the boundaries of reputable school districts. Parents flock to these areas to enroll their kids in the better schools.
No Major Repairs Are Needed
Unless you want the headaches associated with fixer-upper properties, you may want to invest in a well-maintained house or building that has safety hazards or other major flaws. That being said, there are always going to be preventative maintenance tasks to stay on top of but a property management company can ease the repair burden on the owner. That allows you to reap the profits without spending all your spare time repairing and refurbishing the housing units.
Amenities Can Make or Break the Deal for Residents
Take a critical look around at comparable properties in the area. Offering similar perks allows you to remain competitive. Popular choices include amenities like:
- On-site gyms
- Swimming pools
- Attached cafes or coffee shops
- Playground equipment
- Dog parks
If space is an issue, you might want to partner with local businesses to provide residents with free access to some or all of the above.
Whatever level of involvement you have with your property, you want it to make money for you for years to come. Making prudent decisions now can assure a stable future for you and your family.