Things to Look For In a Good Real Estate Investment Property
Thinking about buying a house to fix and sell? Are you considering earning passive income by being a rental property owner? The economic situation is ripe for it, especially as there are a lot of foreclosed properties available in the market. However, as with all investments, you need to do your due diligence to make sure that you invest in a good property. There is a risk of losing your hard-earned money if you make the wrong investment choice.
So what does a good real estate investment property look like? Here are some things to look for:
- Structurally sound house. Whether you are looking to fix and flip or to convert a home into a rental property, you would want to buy a house that has no hidden structural problems. Otherwise, you may end up spending way over your budget and sink more money on repairs than you are prepared to. Be sure to have the house checked by a professional to look for indications of structural problems – cracks on the walls and posts, water marks on the ceiling or indications for the presence of termites. The professional should also check the condition of the plumbing and electrical wiring.
- A good location. As they say in the real estate business, it’s all about location, location, location. You will increase the chance of reselling or having the property rented out more quickly if your property is in a good neighborhood that is near key community amenities such as the supermarket, a park, bodies of water such as the ocean, and major thoroughfares. Perform your research on the neighborhoods to see their standing in terms of desirability. Ideally, the house should also be in an area with a low crime rate and would be accessible to major community services such as the fire department, the police department and the hospital. Also, a good location includes a neighborhood that does not have any eyesores such as broken down houses.
- Proximity to good schools. If you want to target families, it can also be a great idea to look for properties that are near schools that have a good reputation. With a property near a good school district, you can attract parents who desire quality education for their children.
- Proximity to your location. It would be easier to manage a flipping project or to perform the responsibilities of a landlord if you are near the home you bought.
- Design. It can be exciting to get your hands on a striking architectural marvel that is one-of-a-kind. But as an investment, this is not really a potentially profitable prospect. A unique design may make it harder to get the property off your hands. Buyers may balk at a weird design and will be more comfortable buying a house that is similar to the houses around it. This also goes for the floor plan, the availability of large closets and storage spaces and a good kitchen design. Also, the current trend is towards an open floor plan.
- Renovation timeline. Check to see how the timeline will work on the renovation. Ideally, the shorter the rehab period, the better as you are able to potentially get the property off your hands or rented out. A good buy will be something that needs some updating but nothing too major in terms of repairs. For instance, a house that needs a lot of plumbing fixes or to have its wiring updated will cost you more and will also take more time.
- Budget. Even if you have a chance to get a good deal, resist the temptation of closing a deal that is way over your budget. You may be biting off more than you can chew. Only acquire a property that you can get a residential home bridge loan or where your savings can cover not just the cost to purchase but also to renovate. The good thing with hard money loans is that you can get hold of the funds more quickly and close on the deal in time. However, hard money loans can also be more expensive than traditional loans so you will want to stick close to what you can afford when closing the deal on a house.