5 Factors to Consider When Choosing the Right Investment Property

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Choosing the right investment property is not an easy task. Most people invest their money on a property without doing any study and end up losing their hard earned money. If you are serious about your investment, it is always better to take your time and do some research for finding the right investment property.

If you fail to choose the right property, your property will not find buyers and you will end up wasting your money. Whereas if you find the right property, you can enjoy good return and make profit easily as your property will be occupied most of the time. So, how do you choose the right investment property? Is there any formula for choosing the right investment properties?

5 Factors to Consider When Choosing the Right Investment Property

  1. Cost of the Property: Choosing the right property to invest in is very important and the most important point here is to choose the right property at the right price. You should not buy a property at a very high price. As an investor, it is your responsibility to make sure the property you are selecting has a good potential to grow. A lot of research has to be done in order to make sure the property you select is a good investment option and will give you good returns. Once you are 100% sure about the property, you can start bargaining to reduce the price so that you don’t end up paying a higher price for the property.
  2. Calculate the Rental Income: The rental income factor is a very important point to consider when investing your money in a property. The higher the rent, the better the property for investment. Calculating the rental income factor is not that difficult. If you have invested an amount of $1000000 and are getting a monthly rental of $10000, your rental income factor will be 1%. As an investor, it is good to calculate the rental income factor before you purchase the property. You can talk to your property management team or broker to know the exact rental rates in the area to calculate the rental income factor.
  3. Understanding the Break-Even Time: Another important factor to consider when choosing the right investment property is the break even time. Once your property starts receiving a rental, you can use it to cover your initial expenses and once all the expenses are covered, you will start earning profit. Therefore, your break even time will start when all the expenses have been recovered through rentals and you start earning profit. There are many factors that decide the break even time and you need to get expert advice on this in order to make sure you have invested your money on the right property.
  4. Area: When choosing a property to invest, it is very important to consider the area. Does the area in which the property is located have long term growth prospects? Is there any significant development going on? Is it a residential area or an industry area? Does it have the proper supply of water and other essentials? You need to carefully analyze the area before selecting the property. If the area does not offer any growth prospects, then the chances of getting a good rental is less and the value for the property is less.
  5. Condition of the Building: Finally, you need to consider the condition of the building before making a purchase. The older the building, the higher will be the maintenance and repair charges. Therefore, when investing your money on a property, it is important to make sure the building is not too old and there is not much maintenance or repair required.

Conclusion

Choosing the right investment property is a tough decision and because of that most people prefer hiring the service of a professional property management firm. If you are planning to invest your money on a property, you need to consider the above mentioned factors for selecting the right property.

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