Real estate investing is in a unique place relative to the market over the past few years. Comparatively, list prices are down but interest rates are up. This makes it more important than ever to process through your desire to invest. If you've considered purchasing an investment property, we want you to have as much information as possible prior to deciding which path to take. The goal of most any real estate investor is to make money. This means purchasing an investment property at a good price so you can rent it out and eventually sell it for a profit. While there are many things to take into consideration before purchasing an investment property, here our top 10 considerations:
1) Get Pre-Approved for a Mortgage
When you get a mortgage pre-approval first, there are some benefits you can take advantage of, financial benefits being a big one. Once you're pre-approved, most lenders will advice you are the most optimal plan to lock in your interest rate.
2) Cash Flow
Cash could be the defining feature of any investment property. If you're projecting strong cash flow, you should be all set, but if your projection is negative, you might need to reallocate money from other areas such as your salary, other investments, or even savings.
3) Keep Up With Local Pricing Trends
Consider the area where you're thinking of making your investment, and then consider the home pricing in those areas. Brandi will help you track if current prices are on the rise, then compare average neighboring homes to see if you can find savings.
4) Research the Local School Ratings
Areas with quality schools are attractive to parents with school-aged children. Most states rank their schools based on how well the kids in each school district score on common tests like English and math. We can help provide websites to get your research started.
5) Future Development
Before you land on an area for your investment property, talk to people living in the neighborhoods you're considering, as well as the local town hall to get information on planned and potential future development. You can also take a drive around town and see what kinds of construction are already underway. Even if the location you're considering doesn't have many amenities like banks and restaurants at the moment, it might in just a few years. Also, keep an eye out for new roads to accommodate future growth, hospitals, and shopping malls. If a prospective area is set to expand in a few years, you might be able to secure a property at a lower price and be able to take advantage of higher rent and substantial appreciation in the future.
6) Tax Savings With Alternatives
If you're comparing two nearby towns, and one has lower property taxes, you might be able to take advantage of significant savings. Also, find out if tax rates are expected to move up or down in the coming months. Give the local tax assessor a call to find out when the area was last evaluated. If you find out the town is about to conduct a reassessment, this could mean that property taxes will rise.
7) Suburban Areas
If the suburb or secondary market you're exploring is close to a large city, this could be desirable to people who commute to work but don't want to live in the hustle and bustle of the city. With rents and property values rising, the outskirts are becoming popular alternatives and have all the amenities a city does. If you're looking in one of these areas, make sure you check out future development plans.
8) Vacancy
If you've been in the real estate investing market for even a short time, you know many investment properties are vacant. Check out the vacancy rates for the property type you're considering in your chosen area.
9) Know What You Need
Know what you're getting into with rehab or a rental property. Study the property closely to get a good understanding of the state it's in before you commit. This way, if you have repairs and upgrades you'll be able to make an accurate estimate.
10) Start Small And Learn.
If you're new to real estate investing, start small. As you get used to everything that comes with being an investor, you'll want a smaller and easy-to-manage property. When you get some experience under your belt and have earned enough money, you can expand your business by replacing your property with a bigger and more expensive one, or purchasing a second one.
