As a real estate investor, you may be eager to snatch up any property that looks as if it’s a good deal. However, just because a property may appear as a good deal doesn’t mean it is. Follow these four tips to help determine if your next investment is worth the time and money.
The 1% rule
Before purchasing an investment property, consider the 1 percent rule. The one percent rules states that you should be able to rent out your investment property for at least 1 percent of the purchase price. Following this rule ensures that you’ll have a positive cash flow. To determine how much you’ll be able to rent the property out for, look at other properties in the neighborhood and decide what a fair market price looks like.
Disregard the HGTV hype
If you watch any real estate shows on HGTV, you may have the impression that you need to purchase a beautifully renovated home with marble countertops to make any money. Push those lofty expectations out of your head. Buy the house you can afford, and make renovations slowly as you can afford them. The location of the property carries more value than having brand-new stainless steel appliances. Those things can be replaced, but the house can’t be relocated.
Have a sense of the condition and presentation
What condition the property is in and how well it’s presented can help determine how much you’ll pay for it. When looking at an online listing of the property, if no pictures are available, it likely means the home has little, if any, curb appeal. This means you can probably purchase the house at a discounted price, as it needs more work than other properties.
Look at the roofline
The roofline should be the first thing you look at when viewing a new property. According to Wikipedia, the roofline is made up of the “fascia, soffits, bargeboards, antefixes and cladding that forms the frontage immediately below the roof and the eaves of many homes and buildings.” The roofline can reveal a lot about the property, such as if it’s sturdy, simple, vulnerable or complicated. You can see if the roof has been recently replaced or if it’s original to the home. You can determine if water and snow will drain properly, or if you’ll have a mess.
How to Determine if a Real Estate Investment Property is a Good Deal
