27 Jan What to Look For When Buying a Real Estate Investment
Real estate investing is a science. Experienced investors know the data, understand the market, and have a knack for picking rental properties that will make them money. What to look for in a rental property is relatively simple, and it comes down to what kind of investor you are.
Two Types of Real Estate Investors
The speculator is a gambler with deep pockets, who enters a hot or soon-to-be-hot market, who looks to buy big, expensive places and expects their value to rise quickly through appreciation. You’ll see this type of investor at play in markets such as Miami, Vancouver, and even downtown Austin. His or her game is typically short-term. While the rewards can be great, the risk can be greater. Markets are cyclical, and it requires experience and a heavy dose of luck to time them to your benefit. For a non-real estate example of speculation, you needn’t look any further than the current Bitcoin craze. The cryptocurrency bubble will burst, and folks that stay in the market too long stand to lose.
The more typical investor cares about the numbers, first and foremost.
The Number Cruncher
The number cruncher cares about two things: cash flow and return on investment. This investor usually owns 1-3 rental properties, and their end goal is long-term. Cash flow isn’t always an immediate benefit, but this type of investor knows that he or she is building a financial foundation that will pay off down the road.
What to look for in your rental property
- Single-family home or townhome
- 3 to 4 bedrooms / 2 to 3 bathrooms
- No HOA or condo fees
Have some communities in mind? Look for a single-story home, that is the smaller, less expensive choice in the neighborhood. Generally, this type of home will be your safest bet for generating rental income.
Do your research and consider future forecasts for Austin demographics, like changing demographics in your chosen neighborhoods, and evolving trends in contemporary or traditional fashions. Knowing your market will enable you to look at potential properties with this information in tow, and will dictate whether you’ll need to renovate the property you eventually purchase.
A cautionary note about fixer-uppers. While you may have romantic visions of buying and renovating a fixer (thanks, HGTV!), you could end up with a money pit. If a property is clean, functional, and the style fits your neighborhood, then that’s money you don’t need to spend. Save the fixer dream for your dream house.
If you’re ready to look for an investment property, we’d love to help! 1836 Property Management can assist you in finding your rental property and then help you manage it for the highest return on investment.
By: Matt Leschber, 1836PM Founder