Investment Properties – What to Look For When Buying?

When purchasing an investment property, some buyers prefer to look for a turn-key property ready to place tenants, or perhaps already with tenants in place.  Other investors tend to look for distressed properties which allow the new owner to add value.  What you look for in an investment property will vary slightly depending on whether you want a positive geared property or negative geared property and your overall investment strategy. Here are some tips that investors generally consider when purchasing a new property:

Rental Income

Rental income is not the only factor but it’s clearly important to take into account when purchasing an investment property. The rental income, minus the expenses, such as the loan payments, taxes, insurance and other expenses will determine if it is positively or negatively geared property.

Capital Gains

What is the projected growth for the area? Is there new infrastructure planned? Is employment high and is the location going to be in demand for the long term. Properties in high growth areas are typically good properties for capital gains.

Vacancy Rates

Vacancy rates are an important factor in leasing out your property.  If you can’t find a tenant quickly, you can’t get cash flow going.  Check the vacancy rates in the area. If there are a lot of homes up for rent but they are sitting vacant, it will likely be difficult for you to secure a tenant, as well. This will impact your investment and cash flow.

Sources of Tenants

Does the area have a good source of the type of tenants you want? For example, properties near universities are likely to be popular with students and often means a property will remain in demand.  It also means there could be higher wear and tear on the property, and potentially higher turnover.

Surroundings

Properties close to public transport are more desirable as they are easier to lease and resell. Consider the proximity to schools, hospitals, shopping and other resources people want close to them. The more central a property, the more popular it is likely to be.  Charlotte’s rental market is very driven by proximity to various neighborhoods with trendy restaurants, breweries and nightlife. 

Age

How old is the property?  Do you prefer new or old construction?  Do you have capital available to make improvements? If you are buying a brand-new property, research the builder/developer to ensure you know what you are purchasing and what is included. If you are purchasing an older property, make sure it is structurally sound, check for any renovations and repairs which will need to be done soon or the quality of any which have been done. Pest and building inspections are a must. All these things can have an impact on the resale value and rentability of the property.

Ability to Add Value

Ultimately, you are buying a property with the hopes of building wealth.  Buying a property with capacity to increase the value not just through capital growth but also through adding value can be hugely beneficial. If you purchase a home and can immediately do a few things to increase the value, you will have more equity in the home and can expand your property portfolio quicker. Furthermore, increasing the value of the property often means you can increase the rent as well.

Working with an experienced agent can help guide you to the right property that fits your needs.  Quick turnaround on rental comps, future growth in the area, and vacancy rates are important in determining the long-term value of the property.  Charlotte has a highly competitive market for investment properties – let us help!