Real estate investments can be far from low-risk. Upfront costs are steep and investments are tricky to liquidate. Still, if you invest in a sound property and stick with it, you can begin to see profits immediately. And your profits will only climb over time.
Think you’ve got the guts to have a go at real estate investments? Then you might also find these 4 tips for identifying quality investments useful:
It is a truth universally acknowledged that you will see higher return from your real estate investments as they get older—but that doesn’t mean you have to take losses during your first few years of owning a property. Many properties offer immediate return.
Look for properties that require little renovation. Use the 1% rule to sort out the financially sound from the financial flops. The 1% rule states that you should be able to charge in monthly rent at least 1% of the final price you paid for the property.
The number of days a property spends on the market (DOM) before selling can be taken as a good indicator of its value. Properties with a low DOM are hot. Properties with a high DOM? Not so much.
Sniff out neighborhoods that have experienced a recent decline in DOM, and you can be confident that you’ve found a neighborhood that is evolving into a super-hot market. Snag a property in this neighborhood, and you will be able to charge higher rental rates and spend less time chasing after tenants.
Location. When you consider investing in property, check out what’s nearby and what may be nearby in the future.
Good schools, public transportation, high-end grocery markets, shopping, dining, and parks can all do the work of boosting your rental rate and attracting tenants for you. Properties near development projects are risky—could go either way. Properties in a college town are likely to always have tenants, but the turnover rate will be high and just how reliable those tenants are in terms of paying rent on time and not throwing property-damaging frat parties is less certain.
Occasionally, you might luck into the chance to purchase a property that comes with a tenant. Score! Immediate income!
Take a brief moment before you celebrate to run a tenant background check and verify that the tenant has been meeting their rent regularly. A tenant in house situation may seem too good to be true—and sometimes, that’s because it is. If the tenant checks out, go ahead and pop that bottle of champagne!
Any new enterprise takes nerve. In real estate investment, nerve and foreknowledge are the one-two punch that will put knock-out deals within your reach. Make room in your pockets! As soon as you find a quality Rutherford County property, you’re going to need some space to store that extra cash.