New real estate investors are bound to make mistakes. On the other hand, if they’re too cautious, they could miss out on potential profits. There is one mistake, however, that seems unavoidable for investors. Many experience trouble because they approach searching for investments like they would their own home. You might think the two are similar, but they are completely different.
Buying a personal home requires you to “fall in love” with the property and get the entire family on board. In contrast, when buying a home as an investment, you don’t need to be overly impressed. It does, however, need to meet certain criteria if you want it to be profitable in the future.
Don’t Overlook These Factors
Many investors purchase real estate with the intent to rent out the property and make extra income. While this is a fantastic investment opportunity, it’s not always the long-term goal. You may want to resell the property, and that’s where good money can be made. Whether purchasing to flip, investing to hold, or buying for the purpose of leasing, you should always keep the long-term value in mind. With that being said, here are a few important factors to consider:
- Direction of the neighborhood. When it comes to real estate, it’s all about location. The now is important, but look at it from this unique perspective. What will the area be like in the future? Conduct an in-depth analysis of where the neighborhood is trending, and whether that’s in a positive or negative direction. This article from Karen E. Spaeder of Entrepreneur.com is specifically geared towards scouting location as it pertains to retail businesses, and is packed with helpful information for property investors.
- Interior features and design. These might seem like shallow details, but interior features can tell you a lot about the potential of a home. Are any designs outdated or in need of repair? Unless you’re looking to perform a drastic flip on a fixer-upper, the idea is to invest in a property that’s in “move-in ready” condition – or close to it. If looking at a staged home, also consider the small details. Do the throw pillows catch your eye? What about the furniture arrangement? Keep these factors in mind, as you may want to replicate particular interior design features when it’s time for you to put the home back on the market.
- Building codes and restrictions. Investors have to be particularly careful with local ordinances, building codes, and possible restrictions. You can’t assume you’ll be able to add a certain feature, split the lot, or even repaint the exterior. This is especially true for older historical homes that may seem like excellent fixer-uppers. There may be a reason nobody has attempted this; meet with a local expert, review codes, and ensure you’ve talked to people on all sides of the matter. Missing one small thing could ruin an entire investment.
Making the Right Investment
Becoming a real estate investor is exciting and you certainly shouldn’t approach it with fear or trepidation. Do your due diligence, ask questions every step of the way, and when you find one that meets your criteria, including these factors, you’ll have found exactly what you’re looking for.