Real estate often comes to mind when you’re looking for investment opportunities. While buying that perfect-for-you family home is also often a great investment, an investment property is all about the return on investment (ROI). So, what makes a property a good choice for an investment property? We’ve narrowed it down to the following five key things to look for.
Minimal risk
We know that all investments come with some risk, and it’s important to do your due diligence—especially when buying real estate for the sole purpose of investment. Make sure you understand your limitations and options with the property so you can take on minimal risk, and consider historical designations, restrictions, and permitted use, along with any repairs and tenant obligations.
Easy to sell
Is the investment easily liquidated if you need your money back or change your mind? Although most people who invest in real estate borrow the majority of the funds, you’re often required to have a bigger down payment than is necessary on a primary residence. It’s good to know if the property would be an easy resale, so you can access your cash quickly if your needs change in the short term—however, speak to your accountant about any capital gains taxes you may be required to pay on this income.
Rentable spaces
Helping pay down their mortgage is the most popular reason for buying investment properties. Why not rent the basement apartment or suite above the garage if you don’t need the space? That way you can augment your income and apply it to your mortgage. Or, purchase a property with the intention of renting the entire place.
Location, location, location
The importance of location is true for any real estate investment. Start small with the property size, but make sure it’s situated in a good spot. Remember, you can change almost anything about a property, but you can’t change its location.
Cash flow
What is one metric you’ll want to pay close attention to when gauging what makes real estate a good investment? Cash flow. Take a realistic look at the cost of maintaining and holding the property, as well as a cash flow analysis that includes holding the property during periods of vacancies.
At the end of the day, there are many indicators to consider when purchasing an investment property. We’re here to help you make the best decision when the time comes to buy.
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