When you are deciding what parameters your target real estate investment should have, you don’t need to rely entirely on someone else's requirements. You should use your own needs for determining what to look for. However, it may help to consider the things that are also important to other investors.
For instance, Ken McElroy, author of “The ABCs of Real Estate Investing,” prefers to buy slightly larger properties,” so that they will pay for the hiring of a property manager. He prefers not to manage himself. It would probably be a waste of his time to do so anyway. By hiring a property manager, he is able to scout for even more properties, to make even more money.
Another thing that we all should consider is whether the property is going to require extensive renovation. McElroy refuses to consider properties past a certain age. Even if such a property were in good shape, which is doubtful, it will probably be lacking some amenities. In this case, you will not be able to charge as much rent as with other rental units. You will have to spend more time and money getting the investment up to code. Why bother with rental units like that when, with just a little more concerted effort, you can find a duplex or triplex that needs less work and will bring a heftier rent?
Always remember how important the location is when buying an investment property. When deciding upon your market, always remember that the majority of people would prefer to buy rather than rent. So, unless it is a lot more expensive to do so in a particular area, you might have trouble finding and keeping tenants.
McElroy also likes to target out-of-state owners who have only one or two properties in a particular city. Quite often these owners are not keeping the properties up to the level at which they could function, because they initially underestimated the cost and time it would take to manage out-of-town investments. Sometimes these owners are anxious to let someone take their properties off their hands.
Whatever kind of deal it looks as though you will be arranging on a given property, be cautious not to buy something at a “good” price if it is in a poor location. Remember that the only reason you are purchasing investment property is to make money. If it is not going to make money, then NO price is a good price. It won’t going to make money if it is in a poor neighborhood. It is not going to make money if it is in a community who don’t have jobs. It won’t be making money if it is in a place that everyone is moving OUT of. If there are no people, there won’t be any renters either.
These are really just a few qualities that an investor should consider when looking at potential properties, and they will help you on the road to discovering what exactly you need in a property for investment. Your focus is finding good opportunities that will make you money. Look for investment properties that are in good condition and well located. Make sure they are where the people are and where they want to be. If you keep these things in mind, everything else will fall into place.
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