A wise investor looks at many things before buying an investment property. There are a lot of variables at play, differentiating a great investment property from a bad one. Below are a few things to search for as well as some questions to ask yourself before buying an investment property in San Antonio.
What To Look For
A Good Neighborhood
You don’t want to take a risk on a house in a bad area. You may experience trouble finding quality renters, damages to your property, and also the inability to acquire the rental amount you want. While it’s one thing to invest in an up and coming area that is experiencing growth and advancement, it is another to purchase a home in a badly performing area. Rarely will buying in a bad area pay off, and it will require much more work to do so.
Low Vacancy Rates
Take a look at what else is available on the market. Are there many properties out there? What kinds of prices are they getting? Just how long are rentals available? Do your research to make sure you don’t run into problems finding a tenant for the property. If there’s a lot of competition out there, then you may consider some type of addition or update to help your house stand out. But, very low vacancy rates suggest there’s a high demand in the area, so finding a good tenant should not be a problem.
Tenants In Place
Having tenants in place prior to buying will help save you a whole lot of time and money. You won’t need to advertise the property or invest some time showing it and answering questions. You won’t need to interview and screen tenants, hoping you can acquire the right person in there right away. With tenants already in place, you’ll immediately be bringing in income from the property as opposed to having a vacancy.
Demographics Of Area Renters
Who are the people renting in the neighborhood? Depending on who’s being attracted to the area, you can market your property accordingly. If there are lots of families in the area, focus on the spaciousness of the home and its proximity to neighborhood parks and schools. If it’s a younger, more single crowd, you can highlight the qualities of the home that make it good for entertaining. Or you can discuss nearby restaurants and nightlife. Always make sure you’re following fair housing laws.
Questions To Ask Yourself
Have You Run The Numbers?
Never just dive into the purchase of an investment property before you run the numbers, making sure to do a thorough cash flow analysis of the home. Some investors use the 1% rule that states you should be able to rent the home for 1% of the house’s value every month. When renovating a house, most investors will never pay more than 70 percent of the property’s ARV (After Repair Value).
How Many Renovation Projects Do You Want To Take On?
You don’t ever want to bite off more than you can chew. Ensure that the needed renovations and repairs are manageable and not too costly.
What Are Your Financial Goals?
It’s important to know exactly what you would like to achieve with the house and what you want your overall financial picture to look like. Create a plan, so that you can work toward achieving your goals instead of just winging it. For example, set a goal to obtain two new properties every year. With time, this can amount to many rentals, and a substantial sum of money coming in each month.
Will You Need A Property Manager?
The more properties you get, the more likely you will require the assistance of a property manager. You’ll also want to hire one if the investment property isn’t close to where you live. Finding the right property manager can help free you up from a lot of the day to day work when making certain your tenants are paying rent and are happy living in the house. That way you can become more hands-off and spend your time doing the things you like instead.
How Will You Finance The Property?
Obtaining a loan for an investment property is typically more difficult than acquiring a traditional mortgage. Plan on putting at least 20% for the down payment, and if at all possible, paying for the property in cash.
Do You Have An Exit Strategy?
Not every investment goes the way you plan. It’s important to have an exit strategy in place in the event the property is not generating as it really should. You ought to be able to resell the property fast and know when it’s time to do so. Understand just how much you can afford to lose. Sometimes all you can do is cut your losses and just walk away.