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3 Real Estate Investment Strategies for a Changing Market

Posted by Ken Meyer on Tue, Feb 03, 2015

real estate investment strategyReal estate remains a sound investment, especially for experienced borrowers in this buyer’s market. But being successful, even if you have experience buying and managing rental properties, still requires that you do your homework and employ some smart strategies to realize a maximum return on your investment.

Here are 3 investment strategies which will help you achieve your investment goals:

1. Know as much as possible about your properties:

Needless to say, it’s a mistake to see an interesting rental property on a real estate website and, based on scant facts and few reassurances from an agent, you dive right in. Ideally, you want to know as much as possible about the property you’re buying, and often that means buying in neighborhoods you already know.

Certainly, you’ll want to know to what extent renters are likely to be interested in your property. Is it located close to major thoroughfares, good schools, businesses, and public transportation? Are there zoning laws which could impact its marketability? You’ll also want to do some good research into any changes likely to occur in the neighborhood, as these will affect your profitability over the long haul. Are there plans for any new highways, housing projects or strip malls? Will any of these affect your property taxes or sway prospective renters?

If after doing your homework you still have questions, check your facts with local real estate agents. You can also check on websites like Zillow to see how prices have changed in recent years, and how they’re expected to change in the future.

2. Know what renters are looking for:

Before you decide on a rental property, you need to know as much as you can about your prospective customer base. That’s what the major players do, and so should you. For example, Equity Residential Properties Trust, which manages some 140,000 rental properties nationwide, doesn’t buy a new property until it completes a sophisticated demographic analysis of likely renters. It just makes sense that knowing who is most likely to rent in a given region will help you target properties that appeal to those renters.

Currently, renters tend to be single, either never married or recently divorced, which is why one-bedroom condos are second only to vacation rentals in popularity. But that doesn’t necessarily apply to the area where you intend to buy. Again, it’s important to do some research and know the facts about potential renters before you make a decision.

3. Know how to get the best price:

Real estate agents work on commission, so they have a vested interest in getting the highest price they can for a given property. Investors should consider hiring a buyer’s agent to counter this. Just as the real estate agent represents the interests of the seller, the buyer’s agent is looking out for the buyer, and can help you get a better price for your property.

You also need to know how much you can collect in annual rent vs. the price of the property. It used to be the case that a rental property was a good deal if you could buy it for approximately 12 times the amount of annual rent. Increasingly, given a market which favors buyers, that ratio has been declining, and you should be able to acquire a property for about 10 times the amount of annual rent.

The bottom line is that you need to know the facts about any property before you buy it. Fortunately, there are many online resources to help you get those facts and make the most informed decisions possible to maximize the return on your investment.

For more information about how to make sound real estate investments, contact us today.

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