Know what to look for and what to walk away from when shopping for real estate investments.
Investing in real estate is not without risks, largely relying on the status of the stock market and other economic factors. But real estate investment offers many benefits such as building equity and increasing your net worth, giving you more borrowing options.
In 2022, high buyer demand has driven property prices up, so there are fewer sellers. This means prospective buyers must contend with higher housing prices. Buying real estate in 2022 means you are likely to pay a premium, unlike 2021 when a lower mortgage rate helped to offset the higher purchase price.
Despite all the reasons not to invest, you may still want to press ahead and see what’s out there. If so, here are some viable tips to help you know what to look for and what to avoid:
What to Look for in a Profitable Real Estate Investment Property
- A well-maintained neighborhood with good livability and amenities is a giant first step. If you’re investing in a rental property, remember the neighborhood in which you buy will determine the types of tenants you attract and your vacancy rate.
- Know the area’s selling prices to understand local market value.
- Also, consider property taxes which will vary. Higher property taxes are not always a bad thing, especially in a great neighborhood that attracts long-term tenants.
- Good schools and low crime neighborhoods are obviously more attractive.
- Check out the average rental rates in the area and
- Choose a locale that is not prone to earthquakes or flooding, as insurance coverage costs can eat away at your ROI.
What to Avoid if You Want a Profitable Real Estate Investment Property
- A neighborhood with high crime rates and poor schools is an obvious bad choice, even if you’re looking for a fixer-upper.
- Fluctuating rental rates can also be a bad sign. An affordable property today could become a problem tomorrow.
- Locations with poor job opportunities will cause housing prices to go down, depending on the type of business involved.
- New development in an area is often considered a plus, but be aware it could mean competition with your own investment.
- Find out if property tax increases are probable in the near future. A town in financial distress may hike taxes far beyond what a landlord can realistically charge in rent.
Real estate investment can be tougher than many new investors realize, especially playing the role of landlord for rental investments. There are many demands and often your time is at a premium. Many seasoned investors highly recommend getting property professionals to manage, do maintenance, locate the best tenants, and collect the rents. Cousin James Management is a prime example of a reliable, respected property management company.
When you’re ready to partner with a property management company, contact us. Cousin James Management is a 25-year-old family-owned business, providing comprehensive real estate and property management with a focus on owners and investors who expect and appreciate a higher level of service.