How to find ideal investment properties

“Location, location, location.” When you think about finding an investment property, the old mantra about location might be the first thing that comes to mind.

However, there are other key considerations to explore.  

Simply placing your money in the real estate industry doesn’t guarantee results. You need to put in the hard work and learn strategies to maximize your return on investment. One of those strategies is educating yourself on how to find ideal investment properties.

Successful investors are, after all, successful because they’re good at locating properties that will meet their financial goals.

You need to:

1.      Assess the location

Let’s talk about the first thing that comes to people’s minds when they hear “investment properties.” Profits, right? The profitability of any investment is, of course, greatly determined by its location.

During property valuations, location-specific considerations such as the neighborhood status, scenic views, green space, or proximity to desirable amenities all factor in.

Not surprising, is it? Those with the right budget will value beach access, or proximity to major metropolitan hubs, or a place nestled in a lush, green neighborhood. Such properties have the likelihood of appreciating over time thanks to these external factors, growing your initial investment without requiring a whole lot of effort on your part.

2.      Determine the anticipated cashflow

For a good ROI, maintaining a positive cash flow is vital.

How vital? Your business depends on it—whether you’re an active real estate investor or a passive one.

To find an ideal property, try to develop projections for:

  • Available tax benefits and benefits of depreciation
  • Value appreciation vs. mortgaged loans
  • Expected increase in the property’s intrinsic value
  • Rental income if you decide to be a landlord
  • Cost-benefit assessment of renovation before sale

3.      Find out the crime rates

This is somewhat related to our first consideration. Sometimes the nature of a neighborhood isn’t immediately apparent. You might find a property that seems like an unbelievable deal. (Just as your folks always told you: if something seems too good to be true, it probably is.) Without doing more research into an area’s potential criminal activity, you might find yourself stuck in a bad investment. And unfortunately, there may be no way out other than selling at a lower price point.

Once you’re stuck, it’s difficult to get out of a bad deal. So ensuring that the property of your interest is in a safe, crime-free environment is essential.

How can you do that? Ring some doorbells in the area and ask the residents if they’ve ever been concerned about their safety. You can also ask local shopkeepers. Check the local news and do a quick internet search to find out if a crime has been reported in the area recently, and what the long-term statistics show.

If what you discover gives you pause, take a step back and look someplace else.

4.      Start small

If you can invest in a luxury resort and get amazing returns out of it, be our guest! But if your current financial situation doesn’t allow for that kind of investment right out of the gate, consider starting much smaller.

Sherman L. Ragland from The Realinvestors Academy, LLC, offered some advice on this. In an interview with Forbes, he said: “If you can buy, fix, and rent a single-family house, then do that first. Start where you are and grow into bigger projects. Understand what it takes to manage a property before hiring a property manager; borrow small to go big.”

5.      Stay updated with trends

The national and local real estate markets tend to fluctuate over time. If you don’t stay up-to-date on trends, someone else will, and you could lose out on what would be a sweet deal.

Plan on periodically checking local statistics, such as:

  • Foreclosures
  • House-flipping activity
  • Mortgage rates
  • Property inventory
  • New construction
  • Home sales and home prices

This will give you a broad overview of how the market is currently performing, and if it might be a good time for you to jump in and invest. You’ll also have a sense of where the market is going, which will help you to forecast what actions to take in the near-term, if any.

Follow these five guidelines, and you’ll be closer to hitting the jackpot in property investment.

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