In this guide, we’ll show you how to find a property to invest in that will suit your needs and help you make a profit. We’ll cover the basics of investment properties, including what to look for and how to assess their potential. With our advice, you’ll be able to confidently find an investment property that’s right for you.
What is an investment property?
An investment property is a piece of real estate that is not your primary residence. You can purchase an investment property to generate rental income or for the purpose of selling it at a profit later. There are many types of investment properties, each with its own set of risks and rewards. Here are some of the most common:
- Residential property – This includes single-family homes, duplexes, triplexes, and quadplexes. These can be rented out to tenants or used as vacation rentals.
- Commercial property – This includes office buildings, retail stores, warehouses, and industrial buildings. These are usually leased to businesses.
- Agricultural property – This includes farms, ranches, and other land used for agricultural purposes. These can be leased to farmers or used for personal use.
- Recreational property – This includes campgrounds, RV parks, cabins, and timeshares. These are usually used for personal enjoyment or leased to others for their use.
- Development property – This includes vacant land, raw land, and land with improvements such as roads and utilities. These are usually purchased with the intention of developing them into something else.
As discussed above, each type of investment property comes with its own set of risks and rewards. Residential properties, for example, tend to be less risky than commercial properties, but they also tend to have lower returns. Agricultural properties can be very risky, but they also have the potential for high returns. Development properties are generally the riskiest, but they also offer the greatest potential for profit.
What to look for in an investment property
When you’re looking for an investment property, there are a few key factors to keep in mind. These include:
The location of your investment property is important for a number of reasons. First, it will affect the value of the property and how easy it is to sell in the future. Second, it will impact the rental potential of the property. Properties in desirable locations are more likely to be in high demand from tenants, which can help you keep your rental vacancy rate low.
The price of an investment property is obviously a major consideration. You’ll want to find a property that is priced below market value so that you can make a profit when you sell. However, be careful not to overpay for a property just because it’s cheap. Make sure to do your research and know the true market value of the property before making an offer.
If you’re planning on renting out your investment property, then you’ll need to make sure it has good rental potential. Look for properties in areas with high demand from renters, such as near universities or in popular neighbourhoods. Properties with features that are in high demand, such as multiple bedrooms or private outdoor space, will also be more likely to attract tenants.
It’s important to factor in the cost of maintaining your investment property when you’re assessing its potential profitability. Things like monthly utility bills, regular cleaning, and occasional repairs can all add up. Be sure to include these costs in your calculations to get an accurate picture of your expected return on investment.
How to assess the potential of an investment property
Once you’ve found a few properties that meet your criteria, it’s time to assess their potential. Here are a few things to look at when evaluating an investment property:
The rental market
Research the local rental market to see what kind of prices properties are renting for. This will give you an idea of how much income you can expect to generate from your investment property.
The sales market
It’s also a good idea to research the local sales market. This will give you an idea of how easy it will be to sell your investment property in the future and how much profit you can expect to make.
The state of the local economy can impact both the rental market and the sales market. If the economy is booming, then there will likely be high demand for both rentals and sales. However, if the economy is struggling, then demand may be lower.
Take some time to get to know the neighbourhood where your investment property is located. This will give you a better idea of the type of tenants that are likely to be interested in renting there. It can also help you assess the long-term potential for the area.
Once you’ve done your research, you should have a good idea of whether or not an investment property is a good fit for you. With our advice, you’ll be able to confidently find an investment property that’s right for you.