One of the questions that many owners may ask is: what should I be looking for when I’m looking to buy an investment property? There are a few things that we always recommend to owners.
Work with an Experienced Manager or Agent
First, have someone help you look. Whether it’s your property manager or a Realtor, make sure you have someone who can tell you if your potential investment has sound building components. Heating, cooling, and those kinds of things are important in making sure it’s not too expensive or too old to maintain when you have a tenant in place.
You don’t want to see any deferred maintenance. A tenant won’t necessarily live in a property the same way you, as a homeowner, may live. With a lot of deferred maintenance, the cost of that investment would quickly get expensive.
The trend lately has been to buy properties in foreclosure because you can get a good deal. But, there are a lot of upfront costs. Getting a roof and plumbing in shape as well as new interior paint and carpet can become expensive.
Consider Size and Layout of an Investment Property
For a great long-term investment, find something that’s not too big, and not too small. Think about the number of bedrooms.
Middle of the road, cookie cutter homes often work best. Square footage is important, and so is the type of heat, and other things that tenants will consider before they rent the property. Think about whether you would live in the home. Your property manager or agent can help you determine how easily a property will rent.
Homeowner Associations Rules and Regulations
In our area, homeowner associations are prevalent. In an HOA, you need to first make sure you can rent the property out. There’s a chance you could purchase it, and then not be allowed to rent it. Then, think about their rules and regulations. Look at the governing documents so you’re aware of the rules your tenant will have to follow.
Pricing and Rental Value
Purchase price is important, but you also need to know what the home will rent for. Contact a professional property manager to get an idea of a property’s rental value. You want to keep your mortgage payments and rents in range so you’re making money. Someone should at least pay the majority of your mortgage. The goal is to have a tenant in place who will carry the bulk of the cost while you get the gain.