The purchase of rental properties should be done systematically. The property you choose will have an effect on its marketability. Therefore, you simply do not select the property based on your personal preferences. You need to think outside the box and choose something that your target market can’t resist. Doing this ensures you a good rental income each month.
It is important that you do your own careful analysis and research on the property you purchase. However, you have to know what information to take; as well as how to carry out the entire property selection process. In this article, you will get a walkthrough on how you should go about shopping.
Where to start looking
To buy property, you have to start looking somewhere. This shouldn’t be hard to do. Here are the best sources for you to start your search:
a.) classified ads from your local or national newspaper
b.) Real estate magazines
c.) Internet
d.) Real Estate Agents or Brokers
e.) For sale by owners
Factors to consider
Once you’ve reviewed your resources, you should have an idea on how to narrow down your options. For this, it is necessary to analyze whether they are a good investment or not. Here is how:
1. Analyze the value of the property by investigating economic activities (whether it is a business center or not and other things). You have to anticipate what benefits your potential tenants could get within the area. This way, you can identify good selling points for the property.
2. Determine the condition of the real estate market. Check the vacancy rate of surrounding properties. Find out the average rental rates for properties similar to yours. This will give you an idea of how well rental properties are doing in the area.
3. Look at the numbers and do a cash flow analysis. After viewing the property and learning the average rental rates, get a mental picture of how you’re going to price your rental. Project it, find out with possible operating expenses (including your mortgage and interest rates).
Purchase of Economic and Quality Properties
For a business starting out, you may want to capitalize on affordable properties that are of good quality and in good condition. Therefore, the inspection plays an important role in the purchase of rental housing. You have to look at the property closely before signing any purchase contract.
However, you want something that is affordable. If you want to lower the price, do so by asking for discounts. Here are some conditions that you can take advantage of:
1. Desperate Sellers – These people are highly motivated people who want to get rid of their property as soon as possible.
2. Look for repairable unwanted houses: Want super affordable houses? This is what you should get. Just make sure the properties are repairable so you can increase their value and make them more marketable.
3. Depressed market conditions with nearby locations being the hub of economic activity: Need I say more?
Once you’ve found the property you want, it should be easy to proceed with the buying process. You would still have to get through the closing day before you can start trading.