Choosing the right investment property when investing in real estate will help you reduce the risk and maximize your profits.
When it comes to investing in real estate, choosing the right investment property can determine the future of your investment. But what are the aspects that you should take into consideration when choosing the right investment property? And how will they affect your investment?
In this article, I will talk about the most important things to consider when choosing the right investment property in order to maximize your returns and reduce the risks associated with real estate investing.
Choosing the Right Investment Property: Location
When searching for investment properties, it is no secret that the location of the property is the single most important aspect to consider.
The location of any investment property will determine its future performance and its potential to generate profits. When it comes to choosing the right location or market, you should look for markets that are showing signs of growth and where properties that are similar to what you are looking for are performing well.
Additionally, it is important to consider the price to rent ratio in the market that you want to invest in, as this will determine the optimal investment strategy to use and whether rental properties or buy and hold properties will generate the highest returns.
Related: The Best Real Estate Markets to Invest in the US for Price to Rent Ratio
Choosing the Right Investment Property: Property Type
The type of the property that you want to invest can also have a negative or a positive effect on your investment depending on the investment strategy that you want to use.
Certain property types will perform better for certain strategies than others. For this reason, it is important to do some research and see what the optimal property type is in that market for the investment strategy that you’re using.
Choosing the Right Investment Property: Investment Strategy
The investment strategy that you want to use should always be taken into consideration when trying to choose the right investment property.
Simply put, you can’t analyze a property or estimate its future returns without knowing what method you will be using to generate those returns. If you’re using a fix & flip strategy, for example, you will want to choose the right property type for that strategy and plan your finances accordingly.
The way a fix & flip property is analyzed and its returns are calculated is drastically different than if you’re doing a rental strategy, so keep that in mind the next time you’re searching for real estate properties for investment purposes.
Related: Real Estate Investing: Traditional vs. Airbnb Investments
Choosing the Right Investment Property: Renovation & Maintenance Costs
Another aspect that you need to consider is the costs and expenses related to the property that you want to invest in.
If you’re investing in a fix & flip, the costs of renovation and fixing the property will be a major thing to include in your calculations and they will be the deciding factor of whether the property is profitable or not.
For rental properties and buy & hold strategies, accounting for these expenses can help you calculate the return on investment more accurately and guarantee the profits that the property will make.
Naturally, you will want to stay away from properties that are in a bad condition or that are old, as these properties will typically have considerably high renovation and maintenance costs, which renders them useless for investment purposes and might cost you more money than they will generate.
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Choosing the Right Investment Property: Comps & Analytics
When it comes to choosing the right investment property, nothing can help you decide on the perfect property more than using comps and analytics.
Comps and analytics in real estate are methods that you can use to analyze your investment and determine the amount of money that you can generate from each property or market.
Real estate comps refers to comparing a number of investment properties that are similar in size and type and that are in the same area or neighborhood and thus can be compared to one another.
By comparing these properties, you can determine the average performance in the neighborhood as well as identify the properties that are performing above or below that area’s average. Naturally, you will always want to look for and focus on properties that are showing promising and above-average performances to maximize your returns.
Real estate analytics refers to analyzing each investment property using the information and data that you have on it in order to calculate its future returns and running costs.
Using the information gathered about the property, including its location, type, and depending on the investment strategy that you want to use, you can analyze each property to estimate its returns based on the amount of money the property will generate over time vs the amount of money it will cost to fix it and/or run it as an investment property.
Related: The Use of Predictive Analytics in Real Estate Investing
Choosing the Right Investment Property: Use Mashvisor
When it comes to finding the perfect property for investing, Mashvisor is the best tool that you can use.
Using Mashvisor, you will be able to search for properties using a wide range of search tools and filters, allowing you to narrow down your search to properties that suit your search criteria and investment goals before you even start analyzing each property.
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Once you’re at the stage of analyzing properties and using comps, Mashvisor provides you with all the analytics and comps that you need to make wise investment decisions. Additionally, Mashvisor’s investment property calculator can be used to analyze each property for its returns based on the amount of money it is projected to generate, your financing method, and the costs and expenses associated with buying and owning the property.