5 Things to Research About an Investment Property
Closing the deal on a rental investment is a big step, and it’s not a decision you should make without some serious forethought. Obviously, you want to make a wise investment that will pay off for you financially, whether it’s now or in the coming years. But since you can’t predict the future, it’s critical that you do your homework before signing the paperwork. When vetting a new prospective property, consider these 5 factors:
The neighborhood and surrounding area. Before you even set up a walk-through of the property you’re eyeballing, you need to investigate the surrounding area. Take at look at the other homes in the neighborhood. Are they well-maintained? Are there any vacant properties nearby? If there are, you may want to steer clear. Other factors to consider include the development plans for the area, the quality of the shopping and other local amenities, and the proximity of public transportation. All of these elements will play into how attractive your property will be to future renters, so make sure that the surrounding area is one that others would like to call home.
The local stats. Take a look at the local statistics, too. By this, we mean the unemployment rate, median income, quality of the school district, current population and projected growth, and other similar figures. Compare these to other rental markets, or even other neighborhoods or cities within the same rental market, to see how yours stacks up.
Home sales and rental rates in the area. While you’re researching the area, spend some time evaluating some of sales figures and rental rates for nearby properties. You can look much of this information up online, or you can work with a local real estate agent who can pull the comps for you. This information will give you an idea of the value of the property, along with how much you could potentially rent it for.
The home itself. After surveying all of the above and coming to the conclusion that the property looks promising, it’s time to check it out. Schedule a time to visit the home so you can give it a thorough visual inspection and see if it’s truly something you would want to invest in. Pay close attention to any damage or repairs that may need to be made, but also look for ways in which you could potentially alter the property to make it more profitable for yourself.
The financials. This last factor may be the most important – how much the property is going to cost you, and how much you can expect to make off of it. Gather all the financial data you can to develop both cost and income reports. Some of these figures will include the sales price, operating expenses, taxes, insurance, property management fees, rent, application fees, etc. Organize this data to see if the property will be profitable and, ultimately, a sound investment.