5 Tips For Purchasing An Investment Property


Real estate is almost always a solid investment. With the potential for rental income and the future resale value, you can make a significant amount of money investing in real estate. Yet you can also lose money if you do not invest carefully. Here are some tips to make your investment a profitable one.

  1. Choose the Right Property

Price is important, but the property is almost more so. Choose a property in an area where people want to live, that is in good condition and that is priced at or below market value. Putting some money into repairs is fine, but only if that money is not going to cost more than the house is worth. Do not purchase in areas you are not familiar with, because you may be purchasing a home you cannot sell or rent.

  1. Work with Cash

If at all possible, enter the market with cash in hand to make your purchase. A cash offer will put you in the strongest possible negotiation place. Even if you need to pull out equity in your existing residence or other investments to get the cash, consider doing so to make your offer more appealing.

  1. Find an Investor-Friendly Bank

Even if you are paying cash, you will need a bank to show that you have the funds ready to go. Find a bank that is friendly to real estate investors. Talk to your real estate agent or another investor to see what bank they recommend.

  1. Use the Right Realtor

All realtors can sell houses, but only some understand the needs of investors. Choose one that has sold many investment properties, understands return on investment and net operating income and has a list of satisfied investment clients. Interviewing real estate agents will give you a good feel for which ones have these qualifications.

  1. Aim for the Right Return on Investment

The old adage says to look for rental income that is 1 percent of the sales price. So, if you are buying a home that costs $100,000, aim for rental income of $1,000. However, if you are in an area where prices have dropped significantly, aim for even more than this. In some areas where foreclosures are high, you can expect yields closer to or even exceeding 10 percent. Know the market, and make sure you are getting a good return on your investment.

Investing in real estate can be profitable, if you are a wise investor. Take the time to get to know your market, and start investing. Then, sit back and watch as the returns start rolling in!