When looking for investment properties you need to begin the process by asking yourself some questions up front: Is this investment meant to create income or is the goal just capital appreciation?
If the goal is capital appreciation, then you need to look into the long-term outlook of the investment properties and their locations. Are there signs that the properties will increase in value over the term that you intend to hold them to make the investments profitable? The biggest risk in capital appreciation investing, is can you get out in the time frame you had hoped? If you hold long enough, making money shouldn't be an issue. But the risk comes in timing the market to get out at the time you anticipate.
If, on the other hand, your aim is income - then you need to ask yourself a different set of questions: How much am I looking to put down on this and how much am I leveraging? Once you determine how much you will be borrowing, then you can compare that monthly payment to what you can expect to collect in rents. Will the rents cover your monthly payments? If not, then this investment probably doesn't make sense. Even if you can find an investment where the rents do cover more than the debt service costs, a major consideration would be whether you can keep the property occupied. If the rental market in that area is weak, and there is a high probability that you may be sitting on a vacant property, then once again you are in a position where you aren't generating the income you anticipated.
Finding income producing investment properties that are profitable is a very difficult task. That is why when it comes to investing in real estate for income, investors should also consider investing in trust deeds. Instead of owning a property in hopes of keeping it leased and generating income above the mortgage, why not just become the lender? By owning trust deeds you collect interest income from making a hard money loan to an investor and have a secured investment property in place to back up your loan. Trust deeds can take a lot of the guesswork out of investing in real estate for income.