For a real estate investment to be successful and yield returns, one must carry out proper investment property research. In carrying out property research, there is a need to do a lot of background research to make a wise decision to ensure you reduce investment risks and make a profitable investment that will be a real financial asset for you now and into the future.
The question is, where do you begin? Below is a step by step guide for researching investment properties:
1. Get your finances in order: This step is the first and most important step before getting into property investment. There is a need to set a budget and put your finances in order. Find out how much you can afford to spend by listing all your assets, including the cash you currently have for a property deposit and putting aside your expenses. This would point you to how much you can spend on a property investment deposit.
Are you in any financial debt or have debt that you need to take care of? Do you have any money saved for a down payment? Also, do you have enough money to support yourself for at least 7 months ahead?
2. Investment property research starts with a location: Location is essential when investing in a property. Every successful real estate investor understands that the location of a property is a major contributor to its success.
Consider a location with good capital growth potential and would provide returns on investments in the long run. Smart investors research areas with potential and focus on finding properties in these areas within budget. The real estate market analysis process is one way to find a profitable location to invest in.
3. Research an investment strategy: Decide what real estate investment strategy is best for you. You need to ask yourself some questions to ascertain this. For example, are you a long-term or a short them investor? With this, you would understand what strategies would fit your needs. As a beginner investor, it would be advisable, to begin with basic strategies until enough experience is acquired to take on riskier strategies.
Some real estate investment strategies include; rentals, flipping, and fixing, commercial investments, etc. The perfect strategies for beginner investors would be traditional rentals and buy and hold real estate make. For seasoned real estate investors, on the other hand, fix-and-flip, REITs, and commercial real estate investments require more knowledge and experience and would be a perfect strategy.
4. Conduct comparative market research: Carrying out a comparative market analysis is an integral aspect of investment property research. Comparative research primarily entails the comparison of properties that are similar to other properties within the same location. You can find out what properties have recently sold in the area that matches up with the size and amenities of the property you’re considering buying. Find comparables for each of the investment properties you have on your property investment list.
If you’re purchasing an investment, you will need to research each property very thoroughly before you consider investing in real estate.
5. Choose the property with the highest potential returns: A property investment analysis must be conducted to locate the best properties with high return rates. This process consists of various property evaluation methods, such as calculating cash on cash return, capitalization rate, and the rate of return expected from the property. The higher, the better.
In all, the goal is to ensure that you conduct due diligence before investing in a property to ensure you have an asset that would yield good returns over time and has no encumbrances.