10 Tips On How To Find Investment Properties
Many Americans believe that investment properties is the best way to invest money, which is not wrong. It can be a very lucrative way of turning your own money, into more money. We all have heard some incredible real estate stories of when someone started with nothing and is now a multi-millionaire. Don’t forget that we have also heard the stories when an investor lost almost everything that they had due to a property investment gone wrong.
These are both possibilities for all of us. We want to avoid the former as much as possible, but hindsight is 20/20. We are going to discuss how we can find the best investment properties to make the most of our money.
As we discuss the best methods to look for investment properties, you will notice that many of the ways to look for them will be in a question format. This is really to try and get the right mindset of finding the best investment property for your needs.
1. Who do you know?
Knowing someone somewhere who knows something about anything in what you are looking for is going to be a great way to start. Relationships are the key to starting in real estate, especially if you are new to the industry and/or area. Those people you know will know all of the areas or properties to try and avoid. Every location has a different type of need. All types of homes or apartments can do better in different locations depending on the community. They will be able to help you with that immensely.
Getting into a deal with a contact can be very beneficial. Going in with a partner who knows exactly what they are doing is an incredible start. They are not going to go into a deal with the intent to lose money, they want to make money. It will help assure you that it is going to be a pretty decent property.
Making this contacts is becoming easier and easier. There are so many different forums and groups online. Almost everyone is a part of these groups to be a part of discussions and see what else is going on within the industry. Just look up your local area and reach out to some members and meet them at a group gathering, or even take them out to lunch. The options are endless for making these life lasting contacts.
2. Listing Services
MLS, also known as Multiple Listing Service, is a website similar to Realtor.com. This is an online platform that runs nationwide where real estate brokers are putting properties descriptions as well as the photos on the internet. Many properties can be found on these listing services, which will be a very valuable asset in trying to search for the best investment property. You can start with Realtor.com but if you have a real estate agent you are working with they can also access the local MLS for you.
One of these sites that is very popular for commercial properties is Loopnet.com. This is not a residential portal, this is all about commercial property. Large business buildings, apartment buildings, malls, shopping centers, or even restaurants.
Unfortunately, taxes must always be considered when getting into a property. Different states, counties, and cities all want their portion for taxes. It can be very beneficial to really study and figure out where property taxes are going to be more expensive, or almost non-existent. They will always be there – but the amount that is required to pay will change drastically.
Just because the amount of taxes could be more, does not mean that the property should quickly be thrown out of the running. It may be considered, but should not be the final determinant if you should get the property or not. Just because the taxes are higher, does not mean that you cannot make money.
Often times if the taxes are higher in that area, it means that area is booming. It will have more and more people in it, and they may be on the wealthier end of the spectrum. The tenants or residents should have more money to spend.
4. Location, Location, Location
Ask yourself these questions: do you want to buy a very nice home in an area that is in a high crime rate area? Do you want your kids to go to a school with a high crime rate? Do you want to live somewhere that has storms everyday? There are a lot of questions to ask yourself when trying to look at properties. If you don’t want to buy it because of the area that it is in, there is a high possibility that very few people will want to.
It might be good to go look at properties that are being built in newer areas of the city or county. These areas are booming. Currently, the housing market is doing great. There are a lot of construction workers building homes as fast as they can. Look in those new areas as they will continue to develop.
What are the surrounding facilities or stores? Many might be looking for a shopping center, a park, or even a hospital that is in the close vicinity of the property.
It all comes down to the dollar amount. You can always assume that a property is going to be a perfect fit for you, but if you cannot afford it – then there is no point to do it. Before any of the searching is done, you should also figure out your budget beforehand. This will help limit your search and only allow you to search within your price range.
If the property is a much higher value and it is a dumpy area, then how do you expect the tenants to pay their rent? Is the rent going to be too high for them? How fast are they going to fall delinquent within their contract? Does the rent price match the location area? Meaning is it a more expensive building in a more expensive area, or a cheap area. These are some questions to ask yourself when looking to get an investment property.
Many properties often carry a benefit with them such as amenities. If it is an apartment complex or an area of single family homes, are they able to have their own washer and dryer hookup? Most tenants are going to want a simple amenity such as this, and if it does not – how close is the laundry mat?
Newer office buildings often have a gym located somewhere in the building. A lot of employees like to get a workout in right before work begins, after work, or even during their lunch break. Does the building offer the space available for a company gym with all of the correct machinery.
7. Effort Equals Results!
This is an important step. You must do an analysis on yourself to figure out how much effort you are looking to put into fixing this place up. There are some properties that require a “fixer-upper”. Is that what you are looking for? Putting in the time, effort, and money to fix the place up can be rather strenuous. But the return on your money might be exponential. It all depends on what you are specifically looking for.
One last question for this section is: How fast do you need the money? This depends if you have time to be able to fix it up or if you need the cash immediately after purchasing the property. This will be the deciding factor if doing a “fixer-upper” is the right choice for you.
8. Renters in that area
You will have renters, whether they are employees or tenants residing there. You will have them within an investment property. Think about and imagine what type of renter you will get in the area you are looking for property. This will help determine what kind of property you are really in search of. Most areas can be classified in an A,B,C or D area and you can usually expect the quality of tenant you will get will coincide with these letters. An A class building will most likely have the highest rents and therefore will usually attract the highest quality tenant. I wont go down each letter but you can imagine that as you go down to B,C and D the rents and quality of tenant get less desirable.
The way the place is taken care of is completely different on what type of property you buy. Have this perfect image of what you want your renter to be. This will help determine the size and location of the property.
9. Length of projected ownership
How long are you looking to own this property? This may not come as an immediate thought, but it needs to be. You may only want to have it for five years and then sell it to someone else. The housing market may be booming at the time and you will want to lock in your return and make all the money that you can. Or do you want to keep it for the next thirty years until the mortgage is paid off. Then you have straight income every single month.
10. Is the market going up or down in the area you are looking?
How is the market doing? This will require the most effort out of all the steps because the market is always changing. It changes from day to day. Is it a good time to buy a property to have tenants? The answer may be no and you might have to go with another type of investment or a different area. Remember that it was stated at the beginning of this article, Americans love investment properties but the market goes up and down. One part of a city can be up and coming or another area can be on the way down. With that in mind you can see how there are little micro markets in every area and you must be aware of these when choosing a property to invest your money in.
Hopefully these 10 tips on How to find investment properties will assist you in your search. Real estate is a very popular wealth building tool but if you buy the wrong property, it can also be a nightmare to deal with. I tell you that because I have first hand experience with bad tenants and bad areas. Good Luck with your search!