Your ability to evaluate an investment property will determine how successful you are in real estate. While you will develop skills for identifying good investments as you gain more experience, knowing what to look for now will help you avoid common investing mistakes. This guide can help you in choosing your next investment property.
Location is Still Key
Getting the location right can be tricky, and it can often depend on how tenants in your area shop for rental units. Scenic beauty is important, but you won’t want a property that’s too far removed from essential amenities. Alternatively, the property you choose shouldn’t be too close to commercial areas, where zoning issues could affect the peace and comfort of the property for your tenants. Ideally, you should try to find that sweet spot, where it’s a little distant from industrial areas and still provides easy access to public transportation and shopping centers.
Determine the Valuation
Estimating the valuation of a piece of real estate can give you more accurate information for assessing the investment risk. This involves determining the property’s sale price and market value, comparing those figures to the taxes, loans, and upkeep costs that you’ll have to pay into the property. It would help if you also looked at how similar properties perform within the same market area. Valuation is essential in helping you determine how much you should charge for rent and how much you’ll lose when the property is vacant.
Estimate the Upkeep Costs
As you tour the property, be on the lookout for renovations and repairs that will be necessary. This will help you estimate how much it will cost before getting the property in a habitable condition. If it requires extensive repairs, you’re better looking for another type of property. Ideally, you’ll want to make as few repairs as possible to increase your profit margin. There may also be problems that aren’t obvious, so making sure other repairs aren’t necessary will help you prepare for those emergencies.
There may be other factors that you should consider, depending on the market in which you’re investing. It can also help you to talk to real estate investors who already have experience in your area. Networking with others will provide you with the resources you need to become a successful real estate investor.