Finding The Right Residential Investment Property
When looking for the right residential investment property to acquire, the location is one important factor. You may want to research for an area’s capital growth history especially if your strategy is buy-and-hold. Seek for properties that are in areas that are low in crime rate and robust in economic activity. Good schools and a stable local industry are indicators of a neighborhood with great potential for your real estate investment. Consider locations with low vacancy rates.
Determine the needs of your particular market – parhaps a 3-bedroom, 2-bathroom house – and look for a property that suits these needs.
Although buying a property at a good price is great, beware of residential properties that are offered at rock bottom prices; they may have their reasons for being cheap. Properties that are ready for occupancy are great so that you can start renting it out and receiving a steady monthly rental income. However, if rehabbing is part of your strategy, then looking for handyman specials may allow you a discounted purchase.
Inspecting The Residential Investment Property
Thoroughly inspect the property before you ink the contract. You may have to shell out some amount for building and pest inspections but this expense may save you from a possible more costly expense later if you fail to determine a structural defect or pest infestation in the property you would have purchased. Visit the property you are interested in at different times of the day and week so that you can evaluate the traffic and noise levels. Visiting it on a rainy day would also be a great time to find out if there are are leaks. Keep your eyes peeled for cracked walls, deteriorated floorboards under the carpet, mold growth and related problems, plumbing problems and other signs of additional expenses.
Determining The Right Loan For Your Residential Investment Property
You can choose from three types of loans to fund your investment: fixed interest rate, variable interest rate and line of credit. Some investors opt for interest only repayments so that they can reduce their interest repayments. If your investment property is well-founded and you can demonstrate to your lender the potential of the investment, getting an investment loan will not be a problem.
Working Out The Cash Flow of Your Residential Investment Property
Determine the going rental rate in the area where your candidate property is located by asking other real estate investors, real estate agents or by just by browsing the rental listing of the local newspaper. Also sum up the expenses which you forecast to incur when running the property, such as maintenance, property management expense, mortgage, taxes, insurance and vacancy. Deduct this amount from the rental to get your cash flow. Make sure that this is positive or else you may be putting your money where you may just lose it.
Acquiring a residential investment property requires thorough research, due diligence and some math to ensure that you make a considerable profit out of it.
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