Passive income is attractive, and investment properties are a great way to generate that. However, searching for an investment property is a lot different than buying a home for your primary residence. You want to have a different mindset when hunting for your first investment property.
As with any investment, there is a potential risk. Here you could either lose money trying to flip or rent the property, or the value of your property may rise enough for you to make a profit. There are also pros and cons of investing in real estate. Which you probably already know.
So what makes a good investment property? The potential cash flow. How do you look for the right investment property? Well, that’s where I come in. There are many factors to consider when searching for a property. I want to lay out a few of those to help you get started.
The Right Neighborhood
An appealing location is a major key to a great return on investment, whether you are flipping a home or investing in a rental property. Location will determine the amount of rent you will bring in, the quality of your renter, and the vacancy rate you’re likely to experience. For example, if you invest in a property near a university, you are more likely to attract college students and will be left with summer vacancies.
You also want to pay attention to the amenities surrounding the property. Good schools, parks, restaurants, shopping centers, medical centers, and entertainment venues are just a few amenities that will increase your property appeal. Last but certainly not least, you want to consider the safety of the neighborhood. If crime is high in the area, you will have a hard time pricing your property at what you believe it is worth. You also may attract renters that will require a lot of maintenance. On my site, I highlight some of the neighborhoods I work in to help you get a feel for what type of area you would be buying properties in.
Financial Strategy
It is important to have a financial strategy before you buy an investment property. You won’t be the one living in the home, so you need to put numbers over emotions. You may not like every feature of the home, but if the numbers make sense then that’s all that matters.
One thing to pay attention to is property taxes. Remember that you are not just trying to cover the cost of the mortgage, you want to factor operating costs and taxes into the equation as well. Be careful, this can be deceiving. Sometimes you will find that a town in financial distress will raise property taxes beyond what you are able to charge for rent. You want to be aware of how much you’ll be losing. Take the time to calculate the actual payoff against your initial investment.
The Potential
With any investment, you want to make sure there is potential to appreciate. You want to see potential when you first buy the property and when you sell it. You also do not want to over rehab your property. Consider a property that has potential with just a few cosmetic upgrades. You will save more money in the long run by investing in a property that does not need a total makeover. Now, if you are looking to completely flip a house then that is another story.
Going back to the location, the appeal of an area will also increase the value of your home in the future. Are there plans to build new amenities in the area? If so, the value of your property is more likely to appreciate over time.
These are just a few aspects to consider when searching for an investment property in Rhode Island, MA, or CT. Make sure to do all of your research and find a realtor that knows a thing or two about investment properties. If you haven’t found that real estate agent yet, contact Homes With Holly today. I have years of investment property experience and I would love to help you find the home that will bring you the best ROI.
