Many opportunities present themselves when you decide to invest in real estate. How do you know which ones are worth investing in?

Knowing which investment properties are best is easy. They’re the ones that turn a profit.

The challenge is determining in advance which ones will be profitable. You have to weigh several factors and do a little math as you would with any investment you make. While you might have to let your gut weigh in occasionally, you should be able to pick solid investments by keeping these things in mind.

Location, Location, Location

It’s the mantra of every real estate agent, and it holds as true for investments as for the home you live in. But when looking at investment property for sale, the location could mean across the country. You want to start with a city or location with a growing population or a revitalization plan underway.

Once you have the areas of the country narrowed down, the goal is to find properties in locations with low property taxes, good school districts, low crime rates, and plenty of amenities. The neighborhood you buy in impacts the types of tenants you can attract and the rent you can charge.

Homes in nice neighborhoods might be your first instinct, and they do come with lower risk because you can attract higher-income tenants. They can give you steady but lower yields since your expenses will likely be higher, but the cash flow will be reliable. Lower-rated neighborhoods might bring higher yields, but renters could be less stable and cash flow more varied.

Rental Market

When you think you might have found a good area and maybe even a good deal, it’s time to take a look at the rental market. Knowing how many people want to rent and how many rentals there are helps you determine if you want to jump into that particular pond.

A strong market gets you the best return for your money, so you want to buy where vacancy rates are lower. You also need the average rent to be enough to cover payments on your investment property loans, taxes, and other expenses.

Do the research to determine which direction rents and taxes might be headed to ensure you’ll still be able to cover them in five years.

Total Return

The most important factor will be your anticipated return on the investment. This involves long-term thinking about your goals for the property. Once you know those, an investment property calculator can help you calculate your returns.

You’ll need to know the following numbers:

Income made while you own the property
Profit made when you sell the property
Loan details like interest rate
Operating expenses

Once you see your estimated ROI for a property, you can decide if the investment meets your goals. You might be looking to beat the stock market or aim for a higher return of 10 percent or so.

Looking for Investment Properties?

Picking the right investment properties to buy is step one in building a portfolio that turns a profit. Choosing an investment property that makes money starts by narrowing down your options based on location and rental demand then doing the math to make sure it works out. The more information you can gather, the better your decisions will be.

Looking to make a rental property investment in the Bryan-College Station area? Contact us to talk about your options and our property management services.