How to Prevent Your First Investment Property from Becoming a Bust

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Investment properties are not purchases that should be made lightly. In addition to hefty asking prices, many investment properties require a fair amount of upkeep – which, in turn, requires a fair amount of capital. Needless to say, if you purchase an investment property with a less-than-stellar understanding of how such properties generate returns, you’re liable to find yourself filled with regret. So, if you’ll soon be seeking out your first investment property, the following tips can help ensure that it doesn’t become a bust.

Do Ample Location Research

Purchasing an investment property without doing ample location research is highly likely to result in massive disappointment and financial strain. The more popular a location is, the higher its demand for housing – and the higher its demand for housing, the more money you’ll be able to make with an investment property. That being the case, there’s little wonder as to why so many real estate investors regard location as their top priority.

Throughout the course of your research, there are a number of key areas you should pay attention to. For starters, how large is the population? Unsurprisingly, areas that are densely populated tend to have far more demand for housing than sparsely populated areas. Furthermore, what’s the local economy like? If an area has a robust job market and high median income, there’s a good chance the populace is, for the most part, well off.

You should also have a look at local property values and rent prices. You can do this by searching for, “retail space for lease in Tempe.” This will provide you with a solid idea of what a rental property in this area is truly worth. In addition to helping ensure that you don’t overpay for a property, this info will prove crucial when it comes time to determine how much you’ll be charging for rent.

If you need help identifying in-demand areas, enlist the services of a knowledgeable real estate investment company. Not only will seasoned experts educate you on the tenets of a desirable area, they can also point you in the direction of some highly profitable locales. For example, if you’re looking to purchase a rental property in the Golden State, a good investment company can teach you about the best places to invest in real estate in Southern California.

Ensure That the Property is Inspected

No matter how in love you are with a property, you should never commit to purchasing it in the absence of a thorough inspection. Even if you’ve personally gone over the property with a fine-toothed comb, it’s imperative that you call in a certified home inspector. Without a proper inspection, you may not be able to purchase insurance for the property. Furthermore, regardless of how confident you are in your personal assessment of the property, there are a multitude of issues that you, as a nonprofessional, are unlikely to catch.

A thorough inspection from a certified professional will ensure that you’re well aware of any outstanding issues before proceeding to purchase a property. Depending on the scale of the problems an inspector uncovers, you may decide to request a reduction in price or deem it wise to walk away from the deal entirely.

Be Mindful of High-Risk Tenants

Taking on high-risk tenants can prove detrimental to your financial bottom line. After all, if a tenant is unable or unwilling to stay current with rental payments, this is likely to diminish the amount of income a property is able to generate each month.

To effectively reduce your odds of taking on such tenants, make a point of putting every rental applicant through a rigorous screening process. Looking at someone’s credit, income situation and criminal background can help you make an informed decision regarding whether or not to take them on as a renter. If you lack the personal bandwidth to screen every applicant, reach out to a highly-rated screening service.

Buyer’s remorse is the absolute last thing you’ll want to associate with your first investment property. Given how expensive most properties are, enhancing profitability and maximizing returns should be among every investor’s top priorities. While it’s true that finding success through real estate investment requires a fair amount of effort, this should be within the abilities of anyone who isn’t afraid to put in the work – or utilize the pointers outlined above.