Real estate investments are an easy way to make passive income and diversify your portfolio. However, if you do not choose the right investment property, you may find that you have higher vacancy rates and cannot make as much money from your return on investment, also known as your ROI.
Do you want to learn how you can choose the right place for your first investment property? Keep reading these tips to find the best investment property location in your area.
Focus on Location
One of the most important parts of finding good investment properties is to focus on finding the best property location. Location is one of the most important factors that people consider when finding properties to rent, so you want to spend a lot of time researching the best locations in your local area.
Some things that you should consider are the crime rate in the area, if there is public transportation nearby, and if there are nearby schools for tenants who have children.
You also want to find a location that has a high demand for rental properties. If there isn’t a demand for housing, you will not be able to maintain your occupancy rate. When you prioritize finding a great location for your rental property, you will be able to have a more stable and secure investment.
How Much Do You Need to Borrow?
Next, you need to understand how much money you need to borrow.
This will make a big impact on the type of property that you can afford. For example, if you do not have enough money to make a downpayment on an apartment complex, you may want to stick to a single-family home as your investment property.
By looking at available properties online, you will be able to see the average cost of housing in your area and you can decide what type of loan you will need.
Understand Operating Expenses & Unexpected Costs
When you are buying an investment property, you need to understand that there are additional costs, not just the mortgage.
You will have to pay for operating expenses, repairs, maintenance, and other unexpected costs. If you do not factor in these other expenses, you may find that you invest in a property that you cannot afford to maintain.
By understanding the other costs associated with investment properties, you will be able to find something that fits your budget.
If you are unsure of what costs are associated with owning an investment property, you can find free rental property calculators online to learn more about your potential expenses and cash flow.
Consider Rental Demand
As was mentioned before, you need to consider the rental demand before you buy an investment property. While real estate can make you a lot of money, it will not be worth it if you cannot find tenants for your investment property.
It is best to invest in a market that has a stable or even growing rental demand. Otherwise, you may have months where you do not have any additional income.
To learn more about rental demand, you can do a bit of research on the property you are interested in and the location of the property. First, you should consider vacancy rates. If this is higher than average, you should avoid investing in real estate in this area.
You should also look into population growth. For example, if you are buying a rental property in a college town, you may find that there is always a high demand for good housing.
By considering the rental demand, you will be able to find the best property for your investment.
Avoid Fixer-Uppers
When you are buying a rental property, it is best to avoid fixer-uppers. Fixer-uppers are great options for people who want to renovate a home to live in or to immediately sell for profit. However, this is not the best choice for a new investor.
Fixer-uppers take a lot of time, money, and knowledge to get to a place where you can sell them for more money. In fact, fixer-uppers that require major renovations can add an additional 10% to the cost of the home.
This means you will have more debt and it may take months before you can begin renting your property. It also means that you will have the burden of your mortgage rest solely on you, rather than on the money you earn from renters.
Estimate Rental Earnings
Finally, before you buy an investment property, you need to find ways to estimate the potential rental earnings that you could get from your property.
If you are buying the property from another property manager or landlord, you can ask them how much money they are collecting in rent from each tenant and you can also ask them about their rental history.
This way you can calculate how much money you could earn each month from your investment property. When you have a good understanding of the earnings you would make, you can determine how long it would take for you to pay off your mortgage and begin making a passive income.
Get Help With Finding the Best Memphis Investment Property
Real estate investing can be very rewarding and can provide you with a lot of benefits.
However, if you choose the wrong investment property, you may find that you do not get as much value from your investment. By taking each of these factors into consideration, you can find the best investment property opportunities in Memphis.
Do you want to find investment properties to buy in Memphis? Memphis Investment Properties can help! Contact our team to learn more about our properties and to get started with your investments today!