10 Insider Tips to Spotting Great Real Estate Investments

If you’re thinking about leaping into the real estate investing world, you’re in good company. Real estate has great promise for providing the level of profitable return you’re looking to achieve. It’s a reliable way to grow your net worth, especially if you desire a passive income opportunity that can be relatively easy to manage.

The key to making property investments work is to know what to look for before you buy. Here are our team’s top 10 keys to finding that perfect piece of real estate to invest in.

1. Select Prime Locations

Yes, “location, location, location” really is that important. Here’s more detail.

Rentals

Location plays a key factor in the amount of rent you can charge, the quality of your tenants, and the vacancy rates. Busy locales are good. However, if you buy near a university, students could dominate your pool of potential renters, and the two summer months between semesters could be an issue.

Flipping Homes

Look for a neighborhood with good walking scores and access to great schools, jobs, medical centers, shops and public transportation. Also, areas, where new amenities are being funded by local or federal sources, could indicate a future boost in property values.

Safety

A location’s safety affects both rentals and flipped properties. Hiring security officers to patrol your properties is an option, but it cuts into rental profits. So, research crime trends before you invest. 

2. Know the Job Market

Visit the U.S. Bureau of Labor Statistics website, and click on your region to find out about the local job market. If major companies are moving in, so are workers who need a place to stay. 

On the other hand, if businesses are steadily pulling out of an area, property values tend to go down and vacancies go up.

3. Look for Appreciation Potential

Is the property in an up-and-coming area? Can you make a few cosmetic updates and raise the rental rates? How much will it be worth when you sell it? Land and housing tend to appreciate a little bit over time, but some properties may grow faster in value than others. Look for what promises you the most reliable growth.

4. Check Listings and Vacancies

Unusually high numbers of listings and rental vacancies may be a sign of a seasonal cycle, or it could indicate a neighborhood in decline. Either way, high vacancies mean you’ll be limited in how much rent you can ask for. On the other hand, an area with low listings and almost no vacancies means that if you’ve got property to rent, you’ll be able to get what it’s worth, maybe even more.

5. Keep It Low-Maintenance

Low-maintenance properties attract stable, long-term renters. These won’t be the eye-catching, high-end investments on the market, but they also won’t be the low-income, high turnover units either. (Those end up being more work than they’re worth.)

If you’re a handyman, maintaining the property yourself may be a good idea. However, hiring a reputable maintenance company to manage your investment can keep maintenance headaches to a minimum.

6. Know When to Flip, When to Rent

Purchasing an investment home to flip it is different than buying one to rent out. If the house is nearly move-in ready, you can likely rent it quickly. If it needs a ton of work and months to renovate, you’re probably looking at a property you can flip for profit when it’s ready.

7. Go by the Numbers, Not Emotion

Have a financial strategy before you buy, and stick to it. Be careful not to let your “vision” become more important than the facts and the numbers, because numbers don’t lie! Factor in maintenance and management costs, as well as insurance and taxes. Don’t just look at the amount you think you could get in rent. There’s always much more to it than that.

8. Get an Inspection 

A spot-check can reveal the obvious things that need repairing. However, components like water heaters, AC units, furnaces, and roofs may not immediately reveal what condition they’re in. 

Asking a seller about these things is imperative, but the best answers will come from documented home inspections. Any time a house is purchased, an inspection should occur, especially if you intend to use it for long-term passive income. Unexpected large-ticket items can ruin your financial investment plans.

9. Identify the Taxes

Always figure out how much property taxes are before you invest. The municipality’s assessment office will have the information on file, and talking to nearby homeowners can give you an idea as well. In the end, the amount of taxes will affect your profits. 

A high-tax area may not be a bad thing, however. It could mean that the area will attract stable renters, which makes the higher taxes worth it in the long run.

10. Hire a Property Manager

Someone will need to manage your investment property. Doing it yourself is one way to keep more money in your pocket, especially if the property is close to you. However, finding and vetting the right tenants isn’t always easy. 

Hiring a property manager can dramatically boost your experience as a landlord. They’re market experts who know how to find and keep good renters. They are familiar with property law and know how to consistently collect rent as well as field maintenance requests. All these things keep the cash flowing in a positive direction for you. 

Get Expert Help in Finding Great Investment Properties   

Get an advantage in seeking the right investment property by working with an experienced, well-connected team that knows your chosen investment area inside and out. At McGraw, our REALTORS are often the first to know when a great piece of real estate is coming onto the market, and we’ll assess locations and homes to help you get the return on investment you’re looking for.

Check out our most current residential listings, and contact us to learn more. 

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