Diversifying your portfolio of assets and investing is always a great idea to improve your long term financial position. As a result of this, finding investment properties is always a great idea for savvy entrepreneurs. Whether you’re looking for real estate in Vancouver or Los Angeles, there are ways to ensure that you can lock up the best investment properties. These methods will allow you to secure great investment properties, opening up new sources of income to you and greatly improving your financial standing. Here’s how to find the perfect investment properties.
Secure Yourself Financially
Before you can start investing in properties, you need to be able to secure yourself financially. Doing so means eliminating any forms of debt that you may have, such as student loans or car payments. While this may seem like basic advice, you’d be surprised at how many people jump into the world of real estate investments without first securing themselves financially. Not paying off other forms of debt before making such a big investment makes the investment all the riskier, and opens yourself up to even more financial damage should the investment flop. It’s always worth getting as much information as you can to try and manage your finances – as you’ll see here, companies like SoFi can offer a lot of advice and open your eyes to options you might not have considered.
You also need to consider how you’re going to finance your investment too. Do you have savings that will allow you to buy a property? Are you going to ask the bank for a mortgage loan? Or are you going to take advantage of the 1031 tax deferred exchange? Whatever you choose, be sure you have a well-thought-out plan to ensure you don’t waste your investment.
Research Property Managers
If you plan to rent out your investment property, you’ll likely want to hire a property management company to handle things like maintenance requests, rent collection, screening tenants, and more. Research reputable property managers in the area of your investment property. Look at online reviews, fees charged, and how many properties they currently manage. Having an experienced property manager can make owning a rental investment much smoother.
Decide on an Area
Once you’ve sorted out your finances and are ready to take the next step, it’s crucial to pick the right area for your investment property. You don’t want to invest in a place where property values are going down, so do your homework. Look for areas that are on the rise. For instance, if you’re looking for the best areas to invest in student properties, try to find places that are near top universities. On the other hand, if you’re leaning towards family tenants, look for areas with a growing population or a booming economy. The location of your investment property can make or break its success, so it’s really important to choose wisely.
Analyze Rental Income Potential
Before purchasing an investment property, carefully analyze the rental income potential based on comparable rental rates in the area. You’ll want to ensure the monthly rent you can charge will provide enough margin after covering expenses like the mortgage, taxes, insurance, maintenance costs and property management fees. Many real estate investors look for properties where the rent can cover the mortgage payment and then some.
Consider Fix and Flip Opportunities
Another investment strategy is to purchase properties that need renovations or repairs, fix them up, and resell them for a profit (called “flipping”). This allows you to potentially make a larger upfront profit compared to holding a rental over many years. However, it requires more hands-on work and there are risks if the renovations end up costing more than expected. Analyze repair costs closely when considering flip opportunities.
Build a Real Estate Team
Successful real estate investors recommend building a team of professionals to help with different aspects of the process. This could include an experienced real estate agent, lender, contractor, property inspector, real estate attorney, and property manager. Having a strong team in place can make finding and managing investment properties much smoother.
Think About Tenants
Another important aspect of finding an investment property is determining what type of tenants you’ll want to rent to. Choosing a certain group of people will narrow your options down and will steer you towards a particular type of housing. You want to ensure that your investment property and ideal tenants match, because if you don’t you’ll have a hard time actually profiting off of the property. For example, you don’t want to buy a high-end investment property if you plan on renting to college students, as they likely won’t be able to afford your rent and will cause you to lose profits. Matching the property you purchase to your ideal tenants is a key part of finding the perfect investment property for you.
Lock Down Funding
When buying an investment property, you’re likely going to need to secure funding in the form of a mortgage. Mortgages typically require a down payment, so that’s something that you’ll need to ensure that you have. In addition, it may be beneficial for you to secure a pre-approved mortgage. Pre-approved mortgages can prevent a lot of the hassle that comes with closing on a home. In addition, having a pre-approved mortgage provides you with a set amount of money to work with, giving you a better idea of what properties to look for. Finally, having a pre-approved mortgage can make your offer seem much more attractive, as the seller knows that your mortgage is already secure and there is little chance of disruption.