This is a guest post by Angie Picardo, a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy, and save some money with the best savings account.
A large part of what you should look for in your first real estate investment property is predicated on the determination of what kind of property that investment property will be. Do you want to be a landlord or would you rather do a quick flip of a house instead? Once you’ve answered that question, the next point of business is determining whether a residential or commercial property is for you. Depending on how safe you want to play it, it is best to start small and to later transition to bigger projects like commercial properties.
In the case of residential properties, you can choose to invest in a single family home, multiple family home, apartment, apartment complex, or condominium. No matter the decision you make, keep the following tips in mind during your investment process.
Location, location, location
There are two ways of deciding both what type of residential property, and location you choose. You can select the type of residential property first, let’s say you choose apartments, and then look for areas where apartments are within your budget with a solid renters pool available. Conversely, you can choose a location first, perhaps an up and coming neighborhood with new shops and a lot of real estate hustle and bustle. Based on that neighborhood choice, choose the type of investment property that makes the most sense for the area.
Here are some factors to keep in mind when considering location
Average price on the market
Doing some homework on the average selling costs of homes in your desired location or average rent is necessary for determining how worthwhile your investment may be. A rough cost benefit analysis based on the history of rentals and properties sold in the area is a great way to gauge whether the property will make you enough money after mortgage payments, upkeep costs, and other various fees.
Quality and proximity of schools is of great importance for potential buyers and tenants with children. A poor school rating will decrease the amount of money you can get out of your property. On the other hand, proximity to a prestigious and well reputed school will add value to your property and make marketing the property a lot easier.
Tenants will be very wary of moving into a location where crime rates are high. Consult the local police department’s records either online or in person to find out the rate of robberies, theft, and vandalisms in the area.
Proximity to malls, groceries, major highways, and public transport will attract a larger pool of buyers and renters. Take note of the economic productivity of the location and areas around the property. High job growth can mean a greater number of people looking to your property as well.
How Invested are You
Are you willing to do renovations on your first real estate investment? If the answer is no, look to properties that are turnkey and forgo renovations for a future project.
You can even choose to literally invest yourself in your property. If you end up deciding to invest in a rental property, you may wish to stay involved and manage the property yourself as a landlord. If so, make sure you choose a property that is close to where you already live. Not everyone chooses to manage their own properties. For a fee, a project manager can take over the landlord duties.
Buying your first real estate investment property can be a daunting process. Keep your priorities straight and your budget balanced as you choose your first investment piece.