So you’ve decided to join the competitive world of real estate investing. Now is a tricky time to start considering the cost of buying a property, but you have big dreams and high hopes, so you’re ready to make it happen, right?
You shouldn’t settle for just any old property. If you want to make a profit, you need to make sure you’re actually finding a good option. But how can you know? What should you be looking for?
We’re here to help you find your ideal (or at least, close to ideal) property for your real estate investment journey. Read on to learn the top factors that go into a “good buy.”
Location Location Location
Location is everything when you’re trying to find a good investment property. Everything else pales in comparison (as long as you can afford it). You need to pick a home that’s in a desirable location.
There are “good” and “bad” locations in every city. If you’re in Jindalee, Australia, you want to find the best real estate Jindalee has to offer. If you’re from NYC in the United States, the whole area may seem like prime real estate, but that isn’t actually true. You still need to be picky.
So what factors go into a good location? Everyone has different preferences, but here are a few things to keep in mind when you’re making comparisons.
Crime and Safety
Most people, especially people with young children, really value safety when they’re choosing a new place to live. Luckily, you can see crime maps of various neighborhoods all over the world online. They’re not always 100% accurate, but they give you a great starting point when you’re trying to figure things out.
If the home you pick is in a high-crime area, you can take steps to mitigate the problem (adding more outdoor lights, having a key code lock, and potentially hiring security if it’s an apartment complex) but it’s a difficult hurdle to overcome.
If a family with young children moves into your investment property, they’re going to want to be near good schools. Where you live has a direct impact on your child’s education. Take a look at local schools before you make your decision.
Are there local elementary, middle, and high schools around that get good ratings? What’s the graduation rate? Do buses run from the school to the property you’re buying, and if not, is it walkable enough that children can still get there safely?
Speaking of walking, walkability is a huge deal for many people. People love being able to walk to nearby things. Not everyone has or wants a car, so if it’s possible to safely walk from the home to local amenities, it’s a huge plus.
If walking isn’t super accessible, what about public transportation? While it’s not quite as good as walkability, good public transportation accessibility is still a huge plus for many people looking to rent a new home.
Are there any neat things nearby that would make your property more valuable?
For example, perhaps you’re within walking distance from a local farmer’s market, a fantastic park, or a cool downtown area. There may be a gym nearby (or better yet, in the building if it’s an apartment building).
Even if the home itself isn’t ideal, nearby amenities will make a huge difference.
The Upfront Cost
So how much does the home cost?
In reality, a “good buy” is a home you can afford. If you find a gorgeous property that’s well out of your price range, it’s clearly not a good buy for you at this time. On the other hand, properties that are suspiciously cheap may not be good buys either.
You want a home that you can afford and that you can rent out for a reasonable cost. If you know that your mortgage will be way too high and that no one would possibly rent at that cost, you know that the home isn’t for you, no matter how fantastic it is.
Keep fees in mind when you’re thinking about costs. You’ll be paying real estate agent fees, closing fees, inspection fees, and more. If you plan on having a property management company help you, you’ll have to pay for that as well. Your budget is likely smaller than you think.
For Fixer-Uppers: General Repair Costs
Let’s say you decide to save money by buying a fixer-upper. Make sure you’re actually saving money before you make your final purchase. Fixer-uppers need repairs, and even if you’re a handy person, some of those repairs may be out of your wheelhouse.
Certain types of repairs, like water damage repairs and fire damage repairs, are often too expensive to be worthwhile. If you need to redo floors or the roof, that can also be too expensive. These things add up!
General repairs like adding a new coat of paint and replacing old appliances are somewhat expensive but worthwhile and you’ll make that money back.
Required (or Helpful) Renovations
What renovations would you need to make if you wanted to rent out this property for a fair price? Look at other properties in the area to see how you compare.
If every other property in the neighborhood has a parking lot and an outdoor patio space, you need to have that as well, or something better unless you’re willing to lower rent significantly.
If you want to charge a high rent, you need to have amenities to match. Can you afford to add high-end appliances, in-unit laundry, or a great outdoor space?
These are all factors you need to consider.
So What Makes a Good Buy?
Sometimes figuring out which properties are going to be worthwhile investments is tough. There are so many factors to consider, and some of them may conflict with each other.
You’ll likely never find the “perfect” property, but if you keep these factors in mind, you’ll find one that comes close enough. it will be a great starter property for your first real estate investment. Good luck!