What To Look For In An Investment Property
February 15, 2024 5-minute read
Author: Victoria Araj
Are you interested in real estate investing? Before you start the search for an investment property, you should know what to look for. Since these types of properties require a financial investment, it’s essential to get the best bang for your buck – especially if you’re looking to turn this property into a long-term investment.
We’re going to discuss what features to look for when searching for the right investment property for you.
6 Features To Look For In An Investment Property
Look for these features when you embark on the hunt for an investment property.
1. Has Potential For Long-Term Profit
One of the potential benefits you should look for in an investment property is if it has the capability to make you a solid profit over time. If you know how much money you’ll be putting into the home, you’ll want to ensure that you can make some positive cash flow to offset those costs. This is especially important since you’ll most likely also be making mortgage payments on this property.
If you’re going to rent out your investment property, you should also calculate how much you could make in rental income, so you know what type of profit you could come away with after purchasing this property. Not only is this good to do before you buy an investment property, but it can also help when deciding what your budget should be as you begin your search for a house.
2. Located In A Good And Safe Neighborhood
One of the most important ways to narrow your search is to look for a house in a good neighborhood that’s safe. The surrounding area should always be well researched before you purchase any kind of property.
This is especially important if you're thinking about renting it out to tenants. As the property owner, your tenants’ safety will always be your number one priority, which is why you should take the time to find a good neighborhood. On top of the general safety of the tenants, having your investment property in a good neighborhood is overall more enticing to potential renters in the first place.
3. Has Proper Accommodations
Be sure you look for a place that has all of the proper accommodations that you or a possible renter would want in a house. This includes everything from having ample storage space to a sizable master bathroom and spacious open kitchen.
While this list can vary depending on your personal preferences, it’s also important to consider what tenants are looking for if you’re going to rent the property. In either case, it’s crucial to know everything a property has to offer before you buy the house.
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4. Is In Good Condition
When looking for an investment property it’s important to evaluate the current condition. As a potential real estate investor, you should always ensure the property is in good shape so that you have the best chance at making a solid profit from it.
Look for homes that are newer and look like they’ve been well-maintained over the years. Not only does this save you maintenance and repair costs down the road, but it’s a lot more enticing to potential renters or other buyers who you might sell to in the future. Renters or potential buyers aren’t going to want a run-down house that could eventually become a money pit due to wear-and-tear and poor upkeep. It’s much smarter to find an investment property in good condition that will actually be worth it in the long run.
However, the decision to purchase an old house versus a new onsure!e depends on what you plan to do with the property. If you’re looking to purchase an investment property to flip, you might actually be looking for one that isn’t in the best condition. In that case, it’s even more important to assess how much work you’ll have to do in order to restore the house to a livable condition. The same goes for fixer-upper properties as well.
5. Has Low Property Taxes
Another feature to look for when you’re checking out investment properties is to make sure the house has low property taxes. These taxes are set by local governments and are calculated by finding the assessed value of the home, deducting any exemptions you’d qualify for and then applying the municipality’s millage rate.
Since you’re using this property as an investment, you definitely don’t want to be paying a large amount of money in taxes on top of the additional costs that come with owning real estate.
Keep in mind, you can check out the property taxes by state to get a better idea of the best places to live that tend to have lower property taxes.
6. Is Easy To Maintain Over Time
If there’s one thing that will make owning an investment property simpler, it’s finding a home that’s easy to maintain. As you’re looking at property, take the time to assess what you would need to do on a regular basis to keep up with the maintenance of the home – especially if this is going to eventually become your primary residence. This includes everything from gardening to lawn care to other upkeep tasks depending on the age and condition of the home.
If you’re looking for a more low-maintenance type of investment property, a townhouse is a great option in order to avoid having a lot of outdoor upkeep tasks that can take up your time. Since the home shares two walls with other townhomes, there is significantly less for the owner to do outside on a regular basis. Other homes, like apartments or condos, will also have a lot less maintenance for owners to do on the exterior since property management companies will take care of that work.
How To Choose An Investment Property: FAQs
Let’s discuss some frequently asked questions around the topic of looking for investment properties and the qualities potential buyers should look for.
Where can I find an investment property?
There are a couple of different ways you can go about finding an investment property to purchase. You can, of course, do some looking on your own through various listing websites or other online auctions. Working with a real estate agent can also help you locate and choose the right investment property for you.
What should I avoid when looking for an investment property?
When looking for an investment property, be sure that it can make a profit over the long term. As an investment property, its most important trait is the ability to earn you some extra income for many years to come.
What makes a good investment property?
A good investment property should be located in a safe neighborhood, have the potential to make you a solid profit and be easy to maintain over time. Of course, this list can vary depending on your personal preferences and how you plan to use it.
Should I look for an investment property that I can rent out to tenants?
The decision to rent out your investment property is completely up to you and if you’re ready for the added responsibilities of becoming a landlord. If you go into the house hunting process knowing tenants will be living there – take that into account as you look for the right property.
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The Bottom Line
Finding an investment property that meets all of your criteria will take some time, but the payoff for your diligence can be rewarding. While buying property is always a big financial commitment, paying careful attention to the location, condition and necessary maintenance will help you decide if it’s a good investment.
Ready to purchase an investment property? Start the mortgage process today.
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