There are so many reasons why you would want to invest in real estate. It offers you predictable cash flow, the properties appreciate in value over time, allows the investor to build up equity that can be leveraged and is tax-deductible. Plus, real estate will always be important! Everyone needs a place to call home and they always will make this an incredibly stable investment compared to some of the kookier investments you could make – we’re looking at you Beanie Babies and old trading card collections!
So what should you be on the lookout for as a new investor? What features make for a profitable investment property? Here are four main elements you should take into consideration.
Location, location location! The neighbourhood you choose to invest in will determine the types of tenants you’ll be able to attract and the turnover you’re likely to see. College towns will see higher turnover and will be filled with students and properties in good school districts will attract families that will stay in one spot over a longer period of time. Also although it seems like a no-brainer local crime statistics affect the desirability of your property.
Jobs In The Area
When a major company moves into the area people follow looking to snap up jobs! US investors can check out rates of job availabilities in their local areas with the U.S. Bureau of Labor Statistics (BLS). Depending on the company this can cause rental prices to either rise or fall a good way of determining which is to consider that if it’s a well-liked company that will offer stable, well-paying jobs your property values will rise.
Before investing in property check out the local neighbourhood! Take a walk around the neighbourhood and see if you could picture yourself living there. Check out the parks, cafes, theatres, public transport routes. Keep an eye out for planned future developments that have already been zoned or approved of in the area. While periods of ongoing construction could momentarily damage rental prices, the development will pay its dividends when new libraries, parks or educational institutions become a part of your local area.
Real Estate Stats in The Area
Always be aware of the competition! If a neighbourhood has an unusually high number of listings you may want to steer clear as the listings could be emblematic of a seasonal rental cycle or a declining neighbourhood. As any landlord knows, high-vacancy rates lead landlords to lower rents and low-vacancy rates allows landlords to raise the price of rent. You’ll want to look up the average rental prices in the area. As a real estate investor, the income you make from rent is how you provide for yourself, so you’re going to want to make sure you’ll be able to cover mortgage payments, taxes, the expenses of maintaining the property and still have money left over for yourself.
So what sort of property makes for a good first-time investment? Our money is on single-family homes.
They are a hybrid investment meaning that it provides rental income but their retail value is not directly tethered to that income as it the property itself will appreciate in value over time. Put simply, even when left vacant a well-maintained house in a desirable location will rise in value! The investment is relatively cheap and will quickly appreciate in value so you’ll be able to profit and leverage your investment fairly quickly. The market for single-family homes is evergreen people are always moving into them and out of them – so you’ll have no trouble finding tenants. The tenants that you do find will likely be reliable, responsible and self-sufficient professionals with children and busy lives. These sorts of tenants are likely to pay on time and take good care of the property meaning you can save money on hiring a property manager and take care of the limited maintenance yourself!
So now that you’ve begun to educate yourself you’ll want to continue your education on reliable instructive websites and continue to learn all you can so that your investment strategy can continue to evolve over time!