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Determining Whether an Investment Property is a Smart Purchase

Investment Property

The right investment property can be a boon to your finances. Whether you’re looking to flip a property or use it to generate rental income, such an investment stands to produce a handsome profit. However, this doesn’t mean that every investment property is going to prove equally profitable. So, before committing to purchase an investment property, you’d do well to determine whether a certain property is truly a wise use of your capital.

Research the Location 

Investing in a well-maintained, amenity-rich property may seem like a guaranteed way to make money. However, depending on where said property is located, you may run into problems generating the desired returns. Even if a property is well-kept, spacious and packed to the brim with modern amenities, its location can have a tremendous impact on its overall profitability. So, when shopping around for prospective investment properties, take care to regard location with just as much importance as the general condition of a property.

There are a number of easy ways to determine how profitable a location is likely to prove. For example, if an area has an enormous population and is constantly attracting new residents, that’s a fairly strong indicator that there’s ample demand for housing. Furthermore, areas with strong local economies, robust job markets and low crime rates are often viewed as particularly desirable by buyers, renters and investors. 

Should you require any assistance distinguishing opportune locations from undesirable ones, seek out the expertise of a seasoned real estate investment company. In addition to providing assistance with location research, the right company will be able to answer virtually any real estate-related query you may have. For instance, if you’re currently asking yourself, “Is it a good time to invest in real estate?,” this question is best directed to experienced pros. 

Insist on a Prepurchase Inspection 

Buying an investment property without a prepurchase inspection can have a bevy of undesirable consequences. For example, discovering large problems with a property long after the purchase has been finalized can result in tremendous buyer’s remorse and place you in a difficult spot financially. This is why it’s important to know exactly what you’re getting before proceeding to sign any paperwork. Even if a seller makes a convincing argument against a professional inspection, you should never allow yourself to be swayed. Furthermore, if a seller is particularly adamant about an inspection not taking place, you should regard this behavior with suspicion and refuse to move forward with the deal until such time as they consent to an inspection.  

A licensed home inspector will be able to spot a vast array of issues and provide you with a detailed rundown of any outstanding problems a property has. If you’re still interested in a property after receiving the results of the inspection, reach out to various contractors and obtain estimates for any repairs or renovations the inspector has deemed necessary. Next, request that the seller deduct the cost of this work from their asking price. Should they prove un-amenable to this suggestion, it may be best to walk away from the deal – particularly if the repairs/renovations in question are exorbitantly expensive.     

Consider the Amount of Upkeep the Property Requires 

Whereas some investment properties require very little attention, others need a considerable amount of it. So, if you’re thinking about purchasing an apartment building, condo complex or any other large property, it’s important to understand how much upkeep, maintenance and overall management the property will require. Furthermore, you’ll need to calculate monthly maintenance costs and weigh them against how much rental income the property stands to generate each month. When doing this, take care to factor in the salaries of full-time maintenance personnel and property managers.  

A good investment property can generate favorable returns for many years to come. As such, it isn’t hard to see why so many investment properties are maintained by the same families for generations. Still, this shouldn’t be taken as an indication that every investment property is a guaranteed moneymaker. In fact, certain properties can lose you more money than you ever stood to make from them. That being the case, every investor should brush up on the basics on what distinguishes profitable properties from unprofitable ones. When determining whether a property represents a sound investment, take care to consider the factors discussed above.  

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