Finding and buying an investment property is very different from a typical home search. The emotional element tied to a typical home purchase should be absent when searching for an investment property. For investors, a home purchase is all about generating cash flow and earning the best possible rate of return on your investment. The thought of how much rental income the home will provide with tenants making monthly payments or the amount the property could fetch at sale after fixing it up and “flipping” it, should be forefront in an investor’s mind.
Good location for renters
Location is supremely important in every real estate home search, including investment properties. Successful investors look for homes located in neighborhoods with a solid history of attracting renters. Communities with a higher percentage or renters are often located near universities or large business centers where employees frequently relocate. Renters may also want to live in metropolitan areas or close to highways and public transportation for commuting. Real estate investor groups such as the Atlanta Real Estate Investor Alliance offer panel discussions and provide a wealth of information to help new investors find profitable investment properties in desirable locations.
Most homebuyers are willing to put up with added maintenance (such as taking care of a swimming pool) because of a personal preference for certain property features. Conversely, investors tend to look for and purchase homes that are easy to maintain. Single-family homes with extensive landscaping and gardens are generally not a good investment purchase because the owner incurs the additional expense of keeping up the grounds between tenants. Wood decks and finished basements are also nice features which may appeal to potential renters but result in extra maintenance and upkeep for owners. Age-wise, newer homes are also easier and less expensive to maintain — another selling point for investors.
An investment property is first and foremost a financial investment, and the primary reason for its purchase is to make money. Normal homebuyers are happy if their home increases in value over the years, but they do not purchase a home strictly for ongoing cash flow. Prior to purchase, investors must calculate all expenses and fees associated with a home, including insurance, property taxes, homeowners’ association fees and rental licenses. Savvy investors also compute estimated repairs and advertising expenses incurred to acquire a renter. Investors must also factor in costs based on their own repair and property management skills versus contracting out maintenance work on purchased properties.
If you are interested in buying an investment property, it’s a good idea to join a real estate investors group or attend a class on real estate investing. Contact an Atlanta area real estate agent and inquire about desirable rental locations before beginning your property search.
Also, confer with an real estate investment expert. An licensed agent who specializes in helping investors buy and sell can be an invaluable asset. Contact Alisha Spence, the Director of Investor Services at Duffy Realty.
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