Choosing the Right Investment Property

Factors To Consider When Investing In Real Estate

No single property can fit all of the investment goals set by an investor. Even if the investor tried to build a property to specifications, they would find some things “not quite right.”  The investor is, therefore, wise to anticipate problems and have some basic strategies for dealing with them. Here are some suggestions to help one looking to invest in real estate formulate other approaches when evaluating investment properties:
  • Energy saving potential can be as important than style or appearance. Given increasing costs of natural gas and electricity, energy saving has become paramount for successful real estate investing.
  • Location is usually more important than the buildings on the lot. You can always make repairs and improvements to a building, but you can’t do anything to change the qualities of a location.
  • An older property can be preferable to a new property if you want to be reasonably certain about income and cost potentials and are seeking the most rentable space for each investment dollar.
  • Good workmanship is preferable to good materials if you have to make a choice. Workmanship can overcome the defects of poor materials, but you would pay constantly for poor workmanship. Hopefully, you can avoid this kind of choice because poor workmanship and poor materials mean extra costs and continuing problems.
  • Low down payments are preferable because they increase the earning rates on your equity. However, be sure you have a financial reserves in place in case the property does not produce enough net income at times to pay for the financing. Always plan for some percentage of vacancy over time.
  • In a given market, smaller units will usually be more saleable, easier to manage, and easier to keep rented in changing markets. Any apartment property with more than 20 units will most likely require professional management, more dollars down at the time of purchase and larger loans.
  • Size of the property and units within the property should fit the average for the market. Smaller or larger units often present problems that result in lower prices and higher costs.
  • Use experts when in doubt. The costs of using appraisers, builders, lenders, and lawyers are considerably less than those associated with making mistakes. If your investment cannot produce enough income to let you pay for expert help, then it may be the wrong investment.
  • Flexibility. The space in the property should be easily changed to meet different user needs at minimal costs of time and money.
  • Specifying repairs to be made before buying is a safer, less costly financial strategy. Estimate them ahead of time, thereby being able to negotiate for a lower price.
  • Financing trade-offs. To keep loan payments low, negotiate for long-term payout bases at equivalent rates. Include in your estimates the initial costs of the loan and the repayment costs and privileges.
  • Experienced broker. It is important that you have experienced and educated consultant to consult with. A commercial real estate broker can be of great assistance in helping point you in the proper direction for your investment goals.