Many of the richest people in the world get rich by investing and buying real estate. It is therefore no wonder that many people also want to invest and buy properties and rent them out.

With the economy as it is, many people are struggling to buy their own home despite having full-time jobs. In fact, the number of people renting houses has increased to 36.6% in 2016. This number has not been seen in 50 years and there is no sign of this number dropping anytime soon.

People, especially young adults between the ages of 25 and 35, struggle with homeownership because they often struggle to save enough for a down payment on their home. Apparently, having a full-time job is not enough because of the student loans they have to pay off now that they have finished their studies.

So, for people who are considering buying rental properties, now is the perfect time to stop a move and research the perfect properties to buy. If you’re still not sure what to look for, here are some tips on what to look for when you buy an apartment building:

  1. Site

Whenever you buy real estate, the first thing you need to consider is location. Location often dictates the price and target market for the property you are buying.

So, before buying an investment property, you should already have thought about some things and buy a property in the perfect location. For example, would you rather rent your property to budding young professionals or a young family just starting out?

If you’re considering renting to young professionals, look for properties closer to or in the middle of the city bustle. They would like to be closer to where they work and near places where they can socialize with their peers.

Renting out your properties to young families, on the other hand, would require your property to be far but not too far from town, or close to good schools and hospitals. If there is a park nearby, it is better.

So when looking for an investment property to buy, be sure to look for it in ideal locations for your target market.

  1. Deposit

When acquiring investment properties, you need to get your financial situation in order. Make sure your debt ratio, credit score, and other financial metrics are in good shape. Remember that investment properties are excluded from mortgage insurance, so they are bound to be more expensive.

Unlike buying your own home which only requires a down payment of between 3 and 10%, buying an investment property requires a larger down payment which is between 10 and 20% of the price of the property. . This is a significantly larger amount, so you need to save up for it.

If you are considering taking out a loan to get that 20% down payment, it would be best to ask a financial adviser. Obtaining a loan and bank financing for the purchase of an investment property has stricter requirements and conditions, so it would be best to obtain professional advice.

  1. Stay away from fixers

When looking for an apartment building to buy, you might be tempted to buy an apartment that needs renovation, as they are often priced lower than recently built apartments that are only a few years old. Considering the 20% down payment you have to shell out, buying it can certainly make sense.

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However, before you even consider this option, remember that you also need to spend money on top of the down payment to get your property ready to rent out. Of course, if the things you only need to spend money on are installing cabinets and other conveniences, buy them.

But if the things that need fixing are some structural parts of the house, then you should probably stay away from that. There have been many cases where the house problem you see is small but upon closer inspection the problem is deep. That would then mean more repairs and even more money than you have to spend.

So while buying a cheaper one is very appealing, sometimes it just isn’t worth it. They may even end up costing more after repairs compared to a newer, higher quality investment property.

  1. Piece

So let’s say you found an amazing property and the amenities are amazing and it’s close to town but the area just isn’t that amazing and has a high crime rate should you go ?

You see, when you invest in a property, you are not only investing in the property itself, but also in the community that surrounds it. The property itself is very important but the neighborhood is just as important.

No one would want to rent a place that has a high crime rate or is surrounded by old, abandoned buildings. Living in a beautiful space but being afraid to go outside is not an ideal lifestyle.

So, when looking for an investment property, try to find it in a good, peaceful area. In fact, it is better to invest in a property with surrounding communities that are not yet developed than to spend on a good property in a bad neighborhood.

  1. home aesthetics

The aesthetics of the house is also an important factor to consider when buying an investment property. Although a property does not have to have a specific look. It can be modern and minimalist or Victorian and rustic, it doesn’t matter. What matters is that the property must have a certain look or charm.

Basically, what you should consider is that the aesthetics of your property should coincide with your target market and neighborhood. For example, if you look renting out your property to families and you find a good building with an industrial facade in a residential community, then that just doesn’t make sense, does it?

So try to find a property to invest in with the aesthetic that matches what you have in mind. Even if your property has the facilities, it would be hard to rent out if it isn’t charming enough for potential guests to want to take a look.

  1. Facilities and room for upgrades

For real estate investments, it is important to look at the facilities and amenities of the property and see if there can be any room upgrades. These days it seems like everything is updated every year or so. And for your property to be attractive to potential customers, you need to be able to provide up-to-date facilities or at least one that they can upgrade when they need it.

So, as a landlord, it is important that you know what facilities are available and which ones need improvement. In some cases, old fixtures like cabinets may not need to be replaced as long as they are well maintained.

However, some facilities, while well-maintained, may need a makeover to be more modern and appealing to guests. So, in calculating your profits, always set aside money for upgrades and renovations.

You won’t need to overhaul everything, however, spending a little on upgrades won’t hurt if it means your property can be rented out immediately. You can also charge higher rent and turn a profit faster.

  1. Return on investment and capital growth

The most important factor to look for when buying an investment property is the ability of the property to make a profit and increase in value. In real estate, values ​​always increase for properties over long term time.

However, there are more factors to consider to say with certainty that the value of a property will increase in shorter periods of time, say 5 years, for example.

Although you cannot predict the future, you can make an educated guess and see if a certain location can be developed further or not. This should guide you in choosing a property that can earn you a profit on your capital expenditure when buying the property.

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When renting your property, make sure the rental price is no less than 1% of the amount you spent to get it, including the cost of the property and the cost of renovations. If the cost of the property is $35,000 but not worth renting for $350, then the property is not really worth buying.

It is therefore good to keep this in mind when buying an investment property.

Conclusion

Investing in properties is a great way to earn passive income. It’s also a great way to prepare for your retirement so you can live and earn comfortably.

Of course, you may not want to be tasked with managing these properties in the future and luckily there are also companies that are willing to take care of them in return for a percentage of the take.

If you are considering taking on the task of property management, then that would also be awesome. If you have no previous experience, it would be very helpful to ask for help and read to educate yourself and learn. It would also be great if you start small and progress to larger properties once you learn the ropes.

Authors biography

As a financial advisor to businesses and individuals, Millie Sitzer has extensive experience helping her clients organize their finances and project the results of their investments. Millie also works by creating short and long term financial goals for her clients. Millie shares her investment and financial literacy expertise by posting articles online.