Key Factors To Real Estate Investing

image

1

LOCATION

Neighborhood - This may differ based on your preference, but if you are going to invest in a metropolitan area, choose a large one.



Amenities - Amenities, such as the proximity to high paying jobs, quality schools, multiple shops, and decent hospitals also impact property values. 

image

2

DEMOGRAPHICS

Crime Risk - Local crime rates can be easily overlooked by investors, even though they impact risk exposure, real estate values, and investment and insurance rates.



High-Paying Jobs - As an investor, you want to take a good look at the employment and income trends in and around the location you have targeted for investment.

image

3

KEY MARKET

Price-to-Rent Ratio -For rental buy and hold investments in particular, the primary factor the price-to-rent ratio.



Price - However, as an investor you may be limited by the amount of capital you have available, so price is a deciding factor.

image

4

PROPERTY RISK

Construction Style and Quality - Custom-built new homes may be on par with older homes in terms of quality

Climate, Geology and Position - Humidity, temperature extremes, and storms accelerate the aging process, making property “wear and tear” more likely. Position matters too. A house on the top of a hill or with a steep driveway is much harder to sell.

image

1

INVESTMENT DEAL

Property Details - This includes information about physical design of the property, including number of units, square footage, and utility metering design.



Purchase Information - This is basic pricing information, such as the purchase price and the price of any rehab or improvement work you will need to do.

image

2

INVESTMENT DEAL METRICS

Net Operating Income - It is the total income the property generates (after all expenses), not including debt service costs (loan costs).



Cash Flow - Cash flow is the total profit you will see at the end of the year from the property. To determine the cash flow, simply subtract the total expenses from the total income.

image

3

REAL ESTATE INVESTING MISTAKES

Bad Financing - Bad financing can be one of the worst mistakes possible. Typically, bad financing includes a combination of the following: High interest rate, adjustable interest rate, high monthly payments, balloon payments, and personal recourse.

Misjudging Resale or Rent Value - The number one job of an investor is to understand how the end customers (renters and buyers) make purchasing decisions, and then translate that knowledge into value. If you do not do your homework, you will have hard time making investments that earn a profit.

Want to know More? Send us a Message