Investment Property

There are many different types of investment property that real estate investors consider for their portfolio. 

Real estate investing appeals to investors for a wide variety of reasons. In addition to being non-correlated to the stock and bond markets, investment property offers investors the opportunity to invest in hard assets and diversify their portfolios. There is also the ability to diversify a real estate portfolio with a variety of different types of investments. Combining short-term mortgage notes and rehab properties with discounted properties from foreclosure listings and long-term rental property, it’s fairly simple to build a diverse portfolio in a short period of time. 

When considering an investment property for your real estate portfolio, it’s best to determine what your goals are for the investment. Do you want to “flip” it? Hold it long-term? Will it cash-flow positive? Do you have a targeted cash on cash return? Are rental rates in the area enough to cover the property’s monthly expenses? It may seem overwhelming at first, but if you take a strategic approach to evaluating investment property, you’ll find that the process becomes automatic. 

Here’s a useful list of considerations for evaluating property for investment purposes. Remember – the goal no matter how long you decide to hold a property is to profit! 

Rental Rates – Be sure to research the historical rental rates in the area in which you’re looking to buy a property. If rental rates don’t keep pace with property appreciation rates, you may be placed into a negative cash flow situation. 

Vacancy Rates – As it’s likely you’ll wish to rent your investment property in order to offset expenses and/or earn money, you should always research what the rental vacancy rates are in the neighborhood. Vacancy rates are the percentage of time properties are vacant versus in active rental. 

Historical Appreciation Rates – Different areas of the country tend to appreciate at different paces. You can’t expect a property in rural Illinois to increase in value at the same rate as a home in the Phoenix or Denver metro areas. 

Market Trends – Is the area in which you’re looking to buy investment property experiencing a buyer’s market, seller’s market or is it market-neutral? Are inventory levels high and there’s plenty to choose from or is selection sparse?
 
Cash for Purchase Requirements – Do you have the liquid assets necessary, especially considering the tightened lending market, to make a purchase when you identify a prime property? 

While there are many other considerations that will be a part of your purchase decisions, the above criteria are an excellent starting point for your whittling-down your investment property options.

To begin reviewing options for real estate investment such as REO or bank-owned properties, foreclosure listings, multiplexes, single family homes and more, visit InvestorLoft.com. Register for your free account today and receive access to our in-depth tool set for real estate investors. Search for properties by cap rate, cash flow, cash on cash return, down payment and more – it’s a smarter way to search for real estate investments!

The information contained herein is for educational purposes only and not intended to replace the experience counsel of your real estate professional, attorney, tax professional or other advisor. Before initiating any transaction, InvestorLoft recommends you seek professional guidance and perform the necessary due diligence in order to make the best possible decisions for your specific situation.