How do you know if you should invest in a particular property? You know what feels good to you if you were purchasing a home for yourself – but this isn’t yours, right? How will you know if the property will intrigue tenants?
Without thorough research of the market – and the property – you won’t know if you are getting yourself into something that will be a positive addition to your investment portfolio or a damaging purchase.
If you find yourself trying to determine which is the best choice for you, here are a few things to consider:
The Purchase Price
Obviously, purchasing a new home is likely going to be more costly, right? Sometimes you can get a used property in great shape for less money. Though, of course, it is not that simple. You need to take the time to do your research and understand the rental market in your area. Here’s what we mean:
Is the area full of new homes that are highly sought after? What population are you trying to cater to? Take a look at the rentals and see what people are looking for. Is the market full of young couples with kids? Young professional? College kids? Older, retired individuals?
There are perks to new homes, such as being updated for new technology and more current design style. However, older homes are often full of character and depth.
Again, take the time to understand the area where you are purchasing the rental property. This is the best way to determine whether or not you will make your money back on the purchase price of an investment – and how great that ROI will be.
Maintenance costs can eat up a lot of money. If you are purchasing a property that you’d like to rent out, you need to take a look at its overall health – as well as any underlying health issues – that will allow you to determine just how needy the property will be.
Think about it – if a lot of maintenance is needed, this will not only mean money out of your pocket, but it will also be a frustrating inconvenience for your tenants.
New homes come with fresh everything – with many items likely under warranty. Older, used rental properties may have older appliances, fixtures, pipes, and even an older foundation. What will this mean for you? Maintenance.
Do you intend to hold onto the rental property for a while? If so, will the property hold up for a long time to come? As we have discussed, newer homes tend to come with fewer struggles, but buying used – think about the age, the maintenance that may be required, and so on. Your responses may have you question whether or not you want to purchase the older property.
It is not all about your purchase, though. What will the resale be like should you not decide to keep it long-term?
We can’t stress enough how important it is to research the local market where you intend to purchase a rental property. This is the only way to truly be a solid and thorough investor – and create yourself a winning portfolio.
Marina Shlomov, a managing partner at ALH|Podland Rental Homes Property Management is the author of many articles on Landlording, Property Management, and Real Estate Investing. A residential builder in the state of Georgia since 1999, Marina is an investor herself. Her property management company is intended “For Investors” and “By Investors” for a simple reason – she knows what investors’ goals are and she works hard to reach their goals. In her spare time, Marina likes to spend time with her family, friends, garden, read and travel. Check her out atwww.alhpodland.com. You can find Marina’s articles and comments at @rentalhomesatl on Twitter, on Facebook, Google+, Blogger. and YouTube, Bigger Pockets and REI CLub and LinkedIn.