It’s a new year and you have your new year resolutions set up in which you have many things to achieve and one of those things are to purchase a investment property. Luckily, you have come to the right place! i will teach you and inform you of all the signs of what is a good sign for a buy and hold property. Personally purchasing many buy and holds of different criteria, i can give a well thought out and described response on what to look for when purchasing a property. I know every deal is different so this will be more of a general sense on what to look out for.
There are many signs you need to be on the look out for, but i will talk about the main ones that you should immediately spot out if its a good deal or not. The first thing you should look out for is location. The reason i say this is very crucial. The thing is, it doesn’t matter if its a good or bad neighborhood, they both have there ups and downs. What you need to look out for is what is the rent status for that neighborhood. Now i will give an example for one of the neighborhoods where i have scouted before in which i wanted to purchase a property and ended up not buying because of the neighborhood. Niagara Falls, NY is one of those neighborhoods where the prices will lure you in but you will either not be able to rent the property for a very long time or get very low rent. The reason being for this is in this location there is nothing there… aside from Niagara Falls. The only people that tend to live there are retired senior citizens. That is their main demographics, but of course there are others living there as well but it isn’t filled with people who wish to rent. It is more of a home owner location. The job market is scarce which makes it harder to find someone who will pay a stable rent. This was just one example of location.
Now some of you may be saying i am out of my mind saying it doesn’t matter if its a good or bad neighborhood. The reason i stated that is because of this. The bad neighborhoods, the prices of the houses will be lower and very lucrative but it will be a little bit riskier to rent it out since the tenant could end up not paying rent. That is usually not the case, and especially if you have a good property manager and realtor you can always get good tenants. I have personally bought my property in B-C grade neighborhoods and have usually never had any problems. Also, the tax rate will be considerably lower in bad neighborhoods most of the times opposed to good neighborhoods.
Another sign you can look out for is in the property itself. Lets say you found an amazing property that you like. The neighborhood checks out, the price checks out, the taxes are fine as well, now comes the real problem. Is this house in good condition to purchase? everything may seem OK but you need to conduct either an inspection or call a contractor to come check the house and see if this is worth buying for the price. There are some key features which you should keep an eye on because these are the high cost items that will put a dent in your pocket if you purchase the property without knowing. The items i personally keep an eye out for in the property is the foundation, roofing, plumbing, and sewage. If you can personally check these out yourselves beforehand and master how to be able to tell if its good, you will have a good property for a long time. This will save you the cost of having to get an inspection done every time.
The last piece of information i would like to give is make sure the ROI is in terms with what you expect it to be. ROI is return on investment which means how much money you will get back after your initial amount you put down in your investment. Every investor usually has a set amount in there head that they calculate before they purchase their property. Mine is 20-30% but i know most usually have around 10-15%. A simple example of ROI would be lets say you purchased a property for $100,000 and the property was rented out for $1,000 a month. For the year, you have made $12,000 in rent. Your ROI would be $12,000/$100,000 = 12%. This was just a basic example to give you an understanding. There are a lot of other factors that come into play such as taxes, insurance, monthly maintenance expenses, etc. I usually do this with also a rough estimate of taxes and insurance in my mind to give me a good and clear understanding of what to purchase.
These are my tips on what to look out for when purchasing an investment property. I will definitely update this list if i come up with new signs that i find throughout my new purchases. If you guys would like to share your tips let me know below or if you would just wish to discuss about my signs for buy and hold let me know below as well!