Part of learning how to invest in real estate is figuring out what type of investment property to look for. There are a lot of options to choose from. The investor can buy duplexes, condos, apartment buildings, or even houses - and that is just the tip of the iceberg. They can buy lots and build investment property or buy lots and rent them outto people who build on them. They can make “in very good shape” a part of his/her research criteria, or he/she can search for something that appears to be in worse condition than it is, in order to negotiate a good deal. They can hunt for properties with absentee owners in the hopes that he/she locates someone who’s trying to put his/her property out of his/her mind so that they can just be rid of it.
The possibilities are endless. Which property is the right property for you?
Ultimately, the best property is the one that is going to generate the most money while not costing you an arm and a leg to be rented out. Getting a property up to speed might involve renovation to bring a building up to code – adding up-to-date appliances and such. It might involve a fresh coat of paint, or even getting rid of some unwanted tenants. What the potential new owner has to determine is, if the building's problems are fixable.
For instance, in his book Ken McElroy in his book “The ABCs of Investing,” writes about someone who had bought a property without ever viewing the site, and found himself stuck with several tenants who who were bad and dangerous The investment property was in a bad part of town in which the owner should never have bought a property. When he finally got around to contracting Ken’s property management company, he had lost a great deal of potential rental income due to delinquency.
McElroy's team repaired what they could. They got rid of the undesirable tenants and hired security for the building, but they could do nothing about the quality of the surrounding neighborhood. The property would never be one that renters with other choices would want to inhabit, simply based on its location. It would never get the rent that it would have if it had simply been situated somewhere else. Most of the building's problems were simply un-repairable.
The old saying, “Location, location, location” is very influential for a reason. Location might be the single most important factor the real estate investor needs to consider when looking at potential properties to invest in.
Aside from basic viability, an investor must consider how he/she wants to manage his/her investments. McElroy advises investors to hire a property management company for their experience and to free the real estate investor to look for more investments, but some owners simply like a more hands-on approach. This type of person might want to consider buying property that is little enough to manage on his/her own. Other investors are uncomfortable working with partners or investors and so will be limited by that as well. In that case, smaller and less expensive is usually the best option for them.
In the end, McElroy also recommends the investor not assume that he/she should begin with a tiny property. If they have learned enough to invest in the first place, he/she can learn how to use other people's money. They should consider, however, what they are comfortable doing - or what he/she would regard as the most favorable way to move forward. The possibilities are, after all, nearly endless.
Alex Anderson Specializes In MN Investment Property And Helping People Locate Real Estate In Minneapolis. Download A Free Copy Of "The Investors' Rental Guide" At http://www.GreatInvestmentProperty.com
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