Make sure to follow the right trail…
Property investing can sometimes be like following a lovely wide trail on a hike, only to find the trail degrade into a very unused section. Then you have to make a choice: Attempt to follow the vanishing trail, or turn back. Or worse – follow another good-looking branch of the trail. Decisions, decisions…But what basic guidelines can you use when looking to buy investment properties?
Income first, capital gains second
In the current down real estate market, it’s always advisable to look for investments that will throw off the greatest rental income. Any increase in the value of the property that yields a capital gain should be considered an extra performance boost. Key ingredients to creating a sure-fire winning formula when you buy investment properties is to research, crunch your numbers and then negotiate well when searching for new properties to acquire.
Yes, location IS everything
As mentioned in prior articles here, location cannot be underestimated in determining the future viability and performance of your investment. The location should be near easy transportation, as well as near to a thriving work force. Obviously, central cities and commuter suburbs are prime locations for all investors.
Easy maintenance is important
You’ll also want to find a property that will be easy to maintain in coming years. The newer the building, the better. And if you’re trying to be a relatively hands-off style of investor, new is definitely the way to go when you buy investment property. Naturally, for those that want to spend more time and money on their projects, then fixer-uppers are also viable. And you’ll be adding value to the property in the entire renovation process.
Apartments vs. single family houses
When looking to buy investment properties with the greatest rental returns, you’ll want to consider apartments first, rather than single family houses. Remember that financing can be more costly and difficult if you are considering purchasing an apartment building over 6 units. Standard mortgage financing for residential rental property stops at 5 unit buildings. Over 5, it’s considered commercial financing, with concomitant higher rates and more onerous lending standards.
Hold for the long term
Since rental rates have been steadily climbing over the last few years, net rental yields have also been going up on average. So it’s a good idea to think holding longer term right now, to help maximize your yearly yield. No sense selling a winning property when the returns are so worthwhile right now. Wait for the market to at least stabilize and start showing an upward trend before considering unloading a money-making property.
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