Adventures of a Renegade Real Estate Investor

What Does an Investor Look for in a Rental Property?

What Does an Investor Look for in a Rental Property?

By on Oct 31, 2013 in Latest News |

What Does an Investor Look for in a Rental Property?

There are some key things to look for when looking to buy property for investment purposes. The criteria in this circumstance can be quite important as the whole idea of the purchase is to invest or “make money”. Factors to look for include but are not always limited to: condition of the property, length of time it’s been on the market, price, location, cash flow and the capitalization rate.What Does an Investor Look for in a Rental Property?

When looking at the condition of a particular property, you want to take into account things such as how much work you’re going to put into it and whether you’re going to have to rehab it. Make sure to do a home inspection by a professional so that you don’t experience any surprises later that might make you sorry for the purchase.

Additionally, take note how long it’s been on the market. In a good market an ideal rental won’t last long. If it appears to be priced right for its size and location, then BEWARE. There’s probably more wrong with it than meets the eye.

Which leads us to price. Do not get pulled into the trap of buying an affordable property simply because it’s affordable/cheap. Invest money that can give you a fair return or hold its value when you go to rehab or sale.

Now, we think about what else? Location. Location. Location. Higher cash flow on a property happens in areas and surrounding areas of great job opportunity, economic health, a steady rate of growth and an excellent school district.

One of the most important factors is cash flow. Be sure that the numbers are always in your favor as this is the whole point of an investment property. Even if a property has potential down the road, if it’s not currently giving you a positive cash flow, it may be time to move on.

Lastly, before you sign any real estate papers and make a purchase official, check out the capitalization rate, which is the ratio between the net operating income produced by the home and its original price or value.

If the numbers aren’t working out, the investment property probably isn’t working out. Contact us today for more information and help on investment properties and rehab.