10 Tips for Buying Investment Property

Posted at 1:44 PM, Sep. 14, 2007

Whether you are planning to flip a property or just buying to rent and sell for a profit later, here are some things you will want to consider when choosing the property.

1. Price: If you are purchasing just to rent you can afford to purchase at market value, but it's always a good idea to get any property below market value if you can.  If you are planning to flip a home you should look for  homes that are at least 30 percent below the market value of comparable nearby homes.

2. Location: Choose a location with a low crime rate, good schools, and quiet streets. There isn’t anything you can do to cure a poor location.  To get more information on what your location offers, there are a few things you can do....  talk to the neighbors, call the local police dept and ask about crime rates, call the local pizza delivery and ask if they deliver to the area, check out http://www.greatschools.net for more information about schools.

3. Size: Choose a house with three or four bedrooms. Smaller homes are unlikely to have enough buyer or rental appeal.  Talk to local property managers to find out what homes rent best in your area.  In our area it is typically best to look for 3 bedrooms and at least 1.5 baths.

4. Avoid homes that need major unprofitable repairs, include wiring, major plumbing, foundation repairs, major kitchen and bathroom renovation, room additions, and/or a new room. Make sure that the "bones" of the house are good, and...

5. Spend money on profitable cosmetic improvements where you can make money on things like new flooring, fresh paint, light fixtures, and landscaping.  Talk to a Realtor to find out what buyers and renters in your area are expecting and what you need to do to make the home you are looking at appeal to buyers in your area.

6. Know the area where you are investing (or make sure you have a Realtor that knows the area well); know what is going on and what businesses may be moving in or what may be going on in areas that may affect property values.

7. Don’t buy a fixer-upper that is more than 60 minutes from your current residence because it is important to visit everyday while the renovation work is being done.  if you are doing the work yourself you'll want to make sure the home is even closer, you'll spend enough time at the house you don't need to waste time getting there.

7. If you are looking for a rental property, look for properties that are already rented where the renter may want to stay. This cuts down on your having to find a tenant. If you are buying a fixer-upper make sure that your Realtor writes in a clause that gives you the ability to access the property prior to closing to assess needed repairs and get estimates from professionals.

9. Look for sellers who are motivated to sell and who want to make the sale happen; follow the foreclosure listings in your area, and watch for homes that have been unoccupied and on the market for long periods of time.

10. Understand the foreclosure laws in the area where you are buying. In some areas it is well worth buying a foreclosed home, in other areas it may not be. Talk to a foreclosure attorney in the specific area and make sure you understand the laws.