So, you’re considering investing in real estate. You’ve done some research, but your first time around has you a little hesitant about moving forward. The key to success in real estate investing is doing your due diligence and finding an investment property that fits within what you’re trying to accomplish. Are you focusing on multi-family properties like apartment buildings or condos? Or are you taking a single-family approach with the intent to rent or sell? Either way, there are a few key steps to take before jumping into your investment.
Find a Good Location
The location of your investment property means a lot more than you might think. Whether you’re renting it to tenants or selling it after a flip, location matters. Do your research on the data and statistics of growth in the areas you might be interested in. From there, narrow your search down to a few select areas that you would consider buying an investment property in. Buying an investment property in an unfavorable area can lead to making it more difficult to rent or sell, causing you to struggle to obtain your return.
Stray-Away From Fixer-Uppers
While fixer-uppers are often the star of home improvement in the media, generally, they’re not what you want to start off with on your investment journey. Small renovations are doable and shouldn’t cause you too much stress, money, or work; really anything small and cosmetic shouldn’t be too much of a hassle. What you want to avoid are properties that need to be gutted entirely, or have issues within the core and foundation of the property. Foundational, electrical, or piping problems can run you into the red when it comes to fixing them, so make sure you’re looking into the property before you make the purchase.
Estimate Potential Earnings
When you’ve narrowed down your locations and property options, look into the potential for earnings and the return on your initial investment. If you move forward with this property, how quickly will you be able to rent or sell it? Is the local area on a streak of growth with new residents looking for home availability? These considerations and questions will help lead you to an accurate estimate of your potential earnings.
Look Into Market Averages
Take the time to research market averages within the area. What is the average income and employment rate? If you’re looking to rent your investment property, what do you surrounding rental costs look like? This will help you determine where your property stands, and how quickly you can see an investment return.