By Paul Branton, Director of Investor Services for Home Rental Services
Real estate investments can be an excellent way to build wealth, hedge against inflation and secure your financial future. That being said, to achieve success in real estate investing, you need to pick the right properties and have a great team to support you.
In case you didn’t know, I’ve been part of the HRS team since 2010 and I’ve been a licensed Realtor since 2006. My role as Director of Investor Services lets me help you identify and select properties to buy as rental investments and work directly with the Realtor of your choice to help you make the best purchase possible. I thought it might be helpful to share some of the things that are important to consider when buying investment properties.
Here are 10 tips to help you pick the best houses to buy as investment properties.
1) Find the right team. This would include at a minimum a real estate agent and property manager. It may also include a general contractor or vendors to perform work on the property, a lender, an accountant etc.
2) Work with a reputable real estate agent: A reputable real estate agent can help you find the best investment properties that meet your criteria.
3) Interview and “hire” your property manager prior to purchasing your investment property. Utilize the property managers experience and expertise to help advise you and the real estate agent on good rental investments.
4) Determine your budget before you start looking for properties. You don’t want to waste time looking at properties that are beyond your budget.
5) Choose the right location: The location of the property is one of the most important factors to consider. It’s real estate after all…. Location, location, location, right? An area with good infrastructure, amenities, and accessibility will attract more potential renters as well as buyers when the time comes for you to sell. You can check the local schools, hospitals, transportation, and other essential facilities before making a purchase to determine the appeal of the area.
6) Consider the potential for appreciation: The potential for appreciation is the likelihood that the property value will increase over time.
7) Analyze the cash flow of the property to determine how much income you can generate from it. You should consider the rental income, expenses, and taxes.
8) Look for a property with low vacancy rates: A property with low vacancy rates is an indication of its demand in the market. This tends to go back to the location, location, location matra. If the home is in a desirable location and priced appropriately, you should have lower vacancy.
9) Look for a property with low maintenance costs: High maintenance costs can eat into your profits rather quickly. Look for properties that require lower maintenance to maximize your returns. For example, in our market, we prefer to avoid decks if possible as those tend to be a big maintenance issue.
10) Consider the property’s age and condition: The age and condition of the property can affect its value, maintenance costs and your profits.
Bonus Tip: Check for restrictions: Zoning and land use restrictions can affect your ability to use the property for certain purposes. We have seen this becoming more of a topic recently as HOA’s implement new rules restricting what type of rental activities are allowed.
We hope that these quick tips prove to be of value to you as you continue on the journey of real estate investing!