Real estate can be an incredibly fruitful investment. Buying a property at the right time can provide investors with a substantial return when they decide to sell, and that opportunity compels many men and women to consider investing in real estate.
While there’s no denying real estate can yield a great return on buyers’ initial investments, there’s more to making money in real estate than simply buying a property and waiting for its value to rise. Buyers who are thinking of investing in real estate should consider a host of factors before purchasing an investment property.
Price trends
Recent sale activity in a given town or neighborhood is something prospective real estate investors should study before buying an investment property. Would-be real estate investors can explore real estate websites such as Zillow.com for recent sale information, which may also be available through local government agencies. Such data can be invaluable, showing potential investors which neighborhoods are in demand and which may be in decline.
Taxes
Investment properties are not eligible for as many tax benefits as primary residences. However, landlords can write off repairs, management costs and other fees associated with rental properties. But it’s not just their own tax bill prospective investors should consider before buying an investment property. Many potential buyers down the road may prefer a property in an area where property taxes are relatively low, so even if you can afford the tax on the investment property, you may find buyers are unwilling to assume that burden when you put the property up for sale in the future.
Location
Prospective real estate investors no doubt know the value of location with regard to real estate, but if you can’t afford to buy in a neighborhood that’s currently hot, that does not necessarily mean you can’t still capitalize on that area’s popularity. When a town becomes popular, its property values rise, and many buyers find themselves just barely priced out. When that happens, the surrounding towns tend to become the next hot neighbourhood, as these areas are nearly as close to the attractions that make the initial neighbourhood so desirable. Buying on the outskirts of a hot neighbourhood can set you up to benefit nicely when that area gets too pricey.
Schools
School systems should be examined even if you do not have children. In a recent Trulia.com survey of American home buyers, 35 per cent of respondents with children under age 18 indicated they want to live in great school districts. GreatSchools.org has profiles of 200,000 public, public charter and private preK-12 schools. Investors can use the GreatSchools.org search engine to find information about local schools and school systems so they can better position themselves to buy properties in areas that will appeal to buyers down the road.
Real estate can be a fruitful investment, and investors who want to benefit the most from their properties will explore various factors before purchasing a home or homes.
Did you know?
Prospective borrowers can take several steps to earn lower interest rates when applying for loans. Lenders consider a host of factors when determining interest rates for their borrowers. Borrowers are not helpless when it comes to securing low interest rates. The down payment amount as well as borrowers’ credit scores and histories can help or hurt them when it comes to interest rates. For example, the larger the down payment a potential home buyer is willing to put down to buy a home, the more likely that borrower earns a lower interest rate from his or her bank. That’s because the bank sees borrowers who are willing to put down a substantial sum of their own money as highly likely to repay the loan in full and on time. In addition, borrowers with strong credit histories and high credit scores have already demonstrated their ability to repay their debts, and that reputation often benefits them in the form of lower interest rates on major purchases like homes and automobiles. Borrowers also may be able to secure low interest rates if they are willing to repay loans quickly. The shorter the duration to maturity, the smaller the interest rate may be. That’s because banks see long-term loans as less likely to be repaid than short-term loans.
