Finding the Right Real Estate Investment Property: How To Make the Right Decisions

Overview of Real Estate Investment Property

Now is one of the best times of the year to embark on a new venture, and the real estate investment scene is growing by leaps and bounds right now. With this business opportunity, you’ll purchase a piece of property with the sole purpose of generating income, usually by renting it out, either long- or short-term. You can enter the field on your own or pair up with other investors. We’re going to dive into the top points you should consider so that you can find the right property for you.

Key Takeaways

• There are many factors to consider when selecting your investment property, from location to the demand for rentals, and all are equally important.
• Getting to know what your potential renters want will help you focus on the right property.
• Your risk tolerance levels can help you narrow down your property investment options.

Strategies To Pick the Right Property

There are many things to consider when choosing a real estate investment property. Evaluate these strategies before starting your property search:

Location Is King

For real estate professionals, picking the right real estate investment property is all about location. It’s probably one of the most important business decisions you’ll have to make. In today’s fast-evolving technology landscape, you don’t need to live near a house to buy it. Think about what would entice you to move to a new area and look for out-of-state properties in cities that have:

• A young workforce.
• Plenty of job availability.
• An affordable cost of living.
• Big companies moving in.
• Lifestyle amenities, like a vibrant nightlife.
• Wage and household growth.
• High property values.

Expected Return

When it comes to buying a real estate investment property, your return is another primary factor to consider. It’s valuable to think about this income long term. What are your goals? How much money do you want to generate over the coming years? Don’t hesitate to use our creative real estate investing strategies to boost your revenue. We recommend methods like bird dogging, wholesaling, and taking advantage of rent-to-own programs.

Property Age and Condition

Properties don’t usually get better with age, so consider when the home was built before you choose it for your future income property. An older home isn’t off limits, especially if it’s a good deal. Just keep in mind that it will likely need more maintenance and upkeep over the years than a newer one, if not a complete remodel, before you can start interviewing renters.

Another noteworthy age consideration is with comps. Consider how old your income property is in relation to the other neighborhood homes. If your prospect is the newest home on the block, keep shopping. Someday you may want to flip it, and if you do, you don’t want it to be the priciest home on the market because you may find that it’s trickier to unload.

Neighborhood Quality and Amenities

Shopping for a real estate investment property in another state can be an excellent move, but it means you probably won’t be familiar with the area. So remember to investigate past the city level with your research. Learn as much as you can about the neighborhood and evaluate its appeal.

Depending on your investment style and risk tolerance, you may want to stick with homes in higher-rated neighborhoods. They usually come with lower risks, but those properties can be expensive. Lower-rated areas may experience renter instability, leading to a greater chance of cash flow issues. Consider your comfort level as you hone your real estate investing techniques.

Demand for Rentals

Investing in a stable market with plenty of growth and rental demand is another key factor when selecting your real estate investment property. You want to ensure a steady flow of income year-round, so follow these helpful tips when evaluating your potential home’s rental demand:

Vacancy Rates

Vacancy rates are the percentage of empty units out of the total available inventory in an area. You can find the quarterly vacancy and homeownership rates on the U.S. Census Bureau’s website.

Days on Market

Days on market is another valuable tool. This figure gives you an overall feel for the general housing demand in your target location. Zillow offers housing data information, while Realtor.com provides a market trend report.

Population Growth

Is your target real estate investment market outranking others in population growth, or is it losing residents? The U.S. Census Bureau also provides population growth trends by state or city.

Rental Units vs. Available Listings

Sometimes you have to do a little reconnaissance to get all the information you need. Feel free to contact local property managers and ask them about their current occupancy levels. They’re a great source if you want to learn more about your prospective neighborhood’s rental supply and demand.

Get To Know Your Target Renter

It’s important to ask yourself if you would be willing to live in a home before you invest in it. You need to know what makes it appealing to tenants before you’ll know if it’s a good place to put your money. Who’s going to want to live in your home? Is it a four-bedroom house in Scottsdale, Arizona, that a high-income family would love or a seaside condo in Fort Myers, Florida, that’s perfect for retirees? Knowing your target renter and what they want will help you narrow down your choices. For example:

College Students and Millennials

This target group wants affordable housing that’s close to the university, nightlife, and public transportation. Look for a property near career centers, trendy restaurants, and live entertainment.

Single-Families

Most parents dream about providing a home for their kids with a yard and a pet. They also may want to be within a bus ride of good schools and more privacy from their neighbors than other demographics. Families are also drawn to rentals near kid-friendly amenities like parks, community pools, and libraries.

Retirees

Aging adults have their own requirements when shopping for a rental property. They want to be close to the essentials, like restaurants, shopping, and medical centers. Recreational activity is also meaningful to this health-conscious generation, so proximity to fitness centers, walking trails, and rec centers will help your property stand apart from others.

When it comes to finding the right real estate investment property, the more information you can gather about the home, area, and market, the better. Remember to take advantage of our expert advisors if you have questions, and contact us. We’re here to help guide you, protect your assets, and prepare you for retirement.