How to Choose the Right Investment Property

December 22, 2010 by · Leave a Comment 

Most veteran real estate investors will tell you that it takes experience, dedication, and skill to find your ideal investment property. These investors were once novices themselves and might have learned their “lessons” the hard way. However, if you follow the right plan from the start of your investment career, you may be able to become a true pro and reap your rewards sooner than most. 

Know where you’re headed

Setting goals and entering the investment process knowing what you want to get out of it will help you choose the right investment property. This in turn will help you reach your goals most efficiently. Just remember to stay realistic and always know before hand what you’re getting into. Following the steps below will help you do just that. 

Know the area

Whatever market area you decide to invest in, make sure you know what to expect. You can start this by analyzing past sales trends (which tend to repeat themselves) and know which stage the current market is in to plan for the future. Also analyze what types of investments do best in the area. Land purchases? Rental properties? New development? Consider the time frame for your return on investment for each of these types of properties and compare this to what you’re willing to put into a project and what you’re looking to get out of it. 

Do your research

Consider the following factors in researching your potential investment properties:

·         Industry and development forecasts for the area
·         Past, present and future outlook of demographics – what type of people are moving in and out of the area?
·         Land availability – lower availability of land results in a typically upward push in prices.
·         Employment rates
·         Average property values and vacancy rates – your real estate agent can help you with this. 

Name the right price

Determining the fair market value is a key factor in your success as a real estate investor and can also be one of the most challenging aspects of the investment process. Keep in mind that no one wants to overpay for property – and in a fluctuating market, keeping up with sales trends can be tricky. A realtor can help you determine the market value with a comparative market analysis (CMA) using the same techniques a professional property appraiser uses. From these price points, you will be better able to negotiate a market price and sell your investment property at a competitive price and minimize the time your property sits on the market.  

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