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How to Tell if a Property is Worth Investing In

Posted by Mitchell Vinnitsky on Jul 8, 2021 6:00:00 AM
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How to Tell if a Property is Worth Investing InReal estate investment is always a bit of a gamble. Sometimes you make out like a bandit. Other times, not so much. While there’s no way to eliminate risk completely, there are certain things you can look for that may indicate whether or not a property would be likely to produce sustainable returns. To improve your odds of a profitable transaction, here are a few key requirements to add to your list.

Condition

Has the property been recently renovated? Is it move-in ready, or will you need to invest more money to bring it up to code? Are there any warning signs of potential structural problems? No matter how great a property looks on the surface, make sure you inspect it thoroughly. Not only will this help you weed out properties with issues, but it’ll also help you determine how much to offer if you decide to move forward.

Vacancy Rates

If you are looking to purchase a rental property, particularly one with multiple units, it’s a good idea to determine its vacancy rate. This describes both the percentage of units that are currently unoccupied in the property you are considering, as well as how many other properties are vacant in the surrounding neighborhood or city. Obviously, the lower the vacancy rate, the better.

Rent Prices

Knowing the average rental prices in the surrounding area where a property is located can help you determine what type of revenue that property might be able to generate. Do your own research on what other landlords and commercial property owners are charging before you make a decision on whether to move forward.

Property Taxes

Logically speaking, the lower your expenses, the better your bottom line. Property taxes can vary widely from city to city and town to town. Keep in mind, also, that your total expected property tax liability will depend on the value of the property itself, so yours may end up being a bit higher than the average.

Location

The nicer the area, the easier it will be to keep your properties fully occupied, and the more you can charge for rent. Check out the neighborhood and surrounding communities. Is the area safe? Are there good schools nearby? Is the property located in close proximity to amenities, like restaurants, shopping centers, parks, public transportation and health care providers? If you have a desired tenant you’re hoping to market to, choose properties that feature the kinds of essentials they’d be looking for.

There’s no single sign that a real estate investment will turn out to be a sure thing. With so many pieces of the puzzle, investing wisely can be challenging. But by knowing which key criteria are likely to produce the best results, you can reduce your risk and make the process of buying property a little bit easier.

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