4 Things to Look For in a Good Investment Property

Buying a home for yourself and buying an investment property might be similar. However, there is a couple of different things you should look for when considering a property you are planning to invest in. 

1. Projected income
If you're getting into real estate investing, you're probably hoping to get a nice return. But at the bare minimum, you want to cover that monthly mortgage payment. So how much rent should you plan on charging? Go by the 1% rule.

Basically, if you are buying a property for $400,000, your hope is to ultimately be able to get $4,000 a month in rent. So that's where you get that 1%. You're buying for $400,000 and your monthly income is $4,000.

In some parts of the country, where the property is less expensive and rents are higher, you may want to go by the 2% rule.

2. Current tenant situation
One of the first things to take note of at a potential investment property is the tenant situation.

You don't want to buy on a whim and get stuck in a nightmarish situation.

What's going on with the tenants? Are they tenant at will? Are they under the market? Do they pay? Get some clarity around that. Some of these properties get really bad in terms of hoarders and just mismanaged, bad situations. So try to wrap your head around what's going on there.

3. Overall condition
It's impossible to find a perfect property, so be aware of what needs fixing and whether you're prepared to shell out the money and time to get it done.

A new roof? OK, it's expensive, but it's not hard to do. It can be done in a matter of a week or two. Re-plumbing an entire house? That's a different story.

4. Utilities
If you're looking at multifamily property, like an apartment building or a duplex, you'll need to find out if the utility systems, like water and electric, are separate for each unit or lumped into one.

You're in the clear if the systems are separate, but if they're not, then you'll likely have to pay to separate them or foot the bill every month for the whole building.

 

Making a decision on a property to invest in might be challenging, but hopefully, these tips make things a little easier. If you have any questions about investment properties, or if you have a topic you’d like us to cover, give us a call, or send us an email. We look forward to hearing from you!

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