While it’s true that investment property can be profitable ventures, not every property you come across is going to be worth your time, effort and capital. Unsurprisingly, being unable to distinguish profitable properties from unprofitable ones can be a huge detriment to investors who are looking to maximize returns. Furthermore, the differences between such properties aren’t always as obvious as you may think. So, if you’re currently on the hunt for your first investment property, make an effort to steer clear of the following mistakes.
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Regarding Location Research as Unimportant
Investing in a rental property without first researching its location is liable to have some serious financial consequences. Many real estate investors regard location as the single most important factor when seeking out investment opportunities – and as you’ll come to discover, there’s little wonder as to why. For one thing, a property in an area where housing demand is robust is likely to generate much better returns than a property in an area where demand is virtually nonexistent.
So, regardless of how enamored you with a property, you’ll need to do some digging before committing to purchase. This entails carefully researching the population size, local economy, property values and rental rates of the area in which the property is located. Once you’ve gathered all of the necessary info, you should have a clear picture of how much you can expect to make from the property, as well as how large an offer you should put forth.
If you’re unclear on what constitutes a profitable area, reach out to a highly-rated real estate investment company. In addition to teaching you about the tenets of high-return areas, knowledgeable experts will be able to point you in the direction of profitable locales. For instance, Golden State investors should make a point of inquiring about the best places to invest in real estate in Southern California.
Forgoing Pre-Purchase Property Inspections
Forgoing pre-purchase inspections can have considerable ramifications for first-time investors. Discovering major problems with an investment property long after the sale has been finalized can be a uniquely vexing – and massively expensive – experience. So, no matter how picturesque or meticulously-maintained a property appears to be, you should never forgo a pre-purchase inspection from a certified professional.
A certified inspector can identify a multitude of property issues, many of which are unlikely to be caught by anyone outside of this field. There’s also a possibility that they’ll stumble upon issues that even the current owner is unaware of. Inspections can also uncover such crucial safety issues as radon, carbon monoxide and mold. So, regardless of how insistent a seller is that an inspection not take place, make it clear that this is a condition for which there is no room for negotiation.
The results of an inspection can provide you with a solid idea of what a property is truly worth, thus ensuring that you’re able to make an educated offer. Additionally, depending on how many problems are discovered and how large they are, you may ultimately decide that a property isn’t nearly as enticing as you once thought.
Working with Unreliable Contractors
If your first investment property requires significant repairs and/or renovations, dependable contractors can be invaluable allies. However, since hiring the wrong contractors can lead to massive headaches and significant financial losses, you’ll need to exercise discernment when seeking out the right people for the job.
For starters, make sure that any contractor you hire is fully licensed to operate out of your jurisdiction. Secondly, make sure that they have proper insurance. Should an uninsured contractor become injured while working for you, you may be responsible for covering any medical costs they incur. Lastly, take some time to read feedback from previous customers, as this is among the most effective ways to get a feel for someone’s business practices.
It should never be assumed that one investment property is as good as any other. As any experienced investor will tell you, there are a multitude of factors you’ll need to consider when determining whether a property is worth your time and capital. Unfortunately, far too many first-timers fail to do their homework or exercise proper discernment and wind up making a variety of damaging missteps as a result. When seeking out your first investment property, take care to avoid the blunders outlined above.
