Maximize your property search
If you’re considering long term property investment, now is a great time to start building your portfolio of rental property. And there are a few tried and true rules of thumb you should always follow when first starting out, as you learn the ropes of basic rental property investing. Here are some of the best real estate investment ideas to use when searching for rental property.
Look for the unpolished apple
If you search for an investment in an area that is already proven – a “hotspot” so to speak – you’ll be paying a premium price for the ability to be in a risk-averse location. Consider searching for properties in fringe areas, those on the outskirts of hot areas. Or in areas that show signs of urban renewal and gentrification. Hint: let area restaurants act as a pointer for you. The greater the influx of higher-end restaurants to a particular town, the greater the likelihood of gentrification. When you by in up-and-coming areas, as opposed to established ones, you’re taking on more risk, but being rewarded for it with a lower purchase price for the property, and a greater chance for market value appreciation over time.
Search for rental property where few rentals exist already
The element of scarcity will yield a greater return on your investment, since competition for other rental property will be much lower in that area. Hence, you may have the ability to obtain a higher rent roll due to such scarcity of local rental units available.
Always be aware of the local job market
If there is lower unemployment in an area you’re searching in, you’ll have a much easier time renting out your units. Conversely, high unemployment and a dearth of local jobs will yield a greater vacancy rate, no matter how nice your units may be. Be sure to check out the local paper and web sites for jobs in the search area to get a handle on employment demand.
Study vacancy rates in your search area
You’ll want to make sure the local area is stable before you invest heavily in any rental property for the long term. You’ll want to see that there is a good mix of owner-occupied and rental properties, with also a good mixture of varied housing available to renters. In addition, you’ll want to check out how steady the local population has been. The most recent census data will help you greatly in determining the best local areas to key in on.
Locate properties in areas with excellent transportation
Real estate investors should be searching to invest in areas with a great deal of access to public transportation, as well as easy access to local highways. If the area you’re looking in has a higher degree of unemployment, but excellent public transportation like a commuter railroad and/or buses, then you can consider the overall employment picture for a larger geographic area in your investment analysis.
Just because a property is being sold “cheap” does not necessarily mean it’s a good deal
Even though a property may have been discounted several times already, it may not mean that it is being sold at market value. It may still need to come down even more in price before becoming a good deal. Only by crunching the numbers, and running a Comparative Market Analysis can you gain proper insight into what a property’s current market value may be. When in doubt, ask your local real estate agent for their help in running a Comparative Market Analysis for you.
Never feel pressured to make a deal
It is possible that after a long period of searching for rental properties to acquire, you just have not found a good, positive cash flow opportunity. That’s OK – because sometimes it’s simply fine to do nothing, rather than make a mistake. Be patient. Investing is a long term process. And good opportunities will present themselves eventually. As Warren Buffett has said, “when there is nothing to do, do nothing.”
Numbers crunching required
So be sure to utilize all of these rules of thumb to help you in your rental property locating. Remember that any good long term investing will require using these tips in order to find the best real estate investment. Running your numbers and doing these simple analyses for any potential property will point you in the right direction towards the greatest positive cash flow investments.
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