If you have watched other real estate investors for some time, you may have that local idol that you respect for their uncanny ability to choose great properties to invest in.
You may have seen a real estate investor who purchased a property or set of properties that they have owned for many years, even decades, and wonder their secret to picking great properties.
Settling on solid investment property criteria is one of the most important factors to becoming a successful real estate investor.
We will take a look at several criteria – starting from 30,000 foot view and zooming in to a ground-level view of your chosen market.
Bird’s Eye View Investment Property Criteria
When building your investment property criteria for properties you want to invest in, you should start by thinking about the big picture. Imagine looking at a map of the entire United States or even the world. With the information that you know about the trends, you should ask yourself a few believe that the US is a great place to invest in real estate.
If it is, this is great news for you the investor, because it is not easy to invest in real estate overseas – and do it well. Once you settle that your country is good to invest in, think about your particular state and city. Cities like Detroit and Flint, Michigan should be will marked right off your list of places to invest overall.
If you live in the city that gets a bad rap, then you will have to either find pockets of opportunity in the area are considered investing in a city or state close to home. It’s certainly possible to invest in real estate that is across country, but particularly when you are looking to rent the property out for long-term income, you want to try to stay close to home so that you can keep an eye out on the property.
This is the case even if you hire a great property management company to landlord for you.
Still, there may be suburban areas and pockets of incredible opportunity even in these areas. So, if you happen to live in or near one of these cities, you will need to do good research about will the growth trends in various areas of your city.
The second closer look at some of the criteria to consider in your big picture analysis.
Considering the population trend investment property criteria is critical. Quite simply, this tells you whether the area is growing or declining. Of course, you want to invest in an area that is trending upward because this will increase rental and sales prices of real estate.
Some of the factors that influence population growth trends include whether, local politics, natural attractions, jobs, and economy. Natural attractions include things like beaches, mountains, parks, lakes and other geographic features.
Will local politics may include things like tax credits that attract big companies to certain cities that bring more jobs. Most red will-blooded Americans dislike living in frigid cold weather, which makes Fairbanks, Alaska a pretty undesirable place for most Americans. Which may be why the population is just 31,891.
Economy and Employment
The prices of real estate will always be related to the jobs of the people who will purchase the residential property or rent from you. In other words, if you own property in an area where high income people live, you will command higher rents. If you rent in an area where there’s not a lot of jobs, you’ll command lower rents.
Most people move to new areas for jobs. So, if you live in a blue-collar factory town in the information age, you likely don’t see an uptrend of population growth. More than likely, your economy is fragile or on the decline.
You need to look at whether the job market is on the rise or declining. Choose a location to invest where good paying jobs are nearby. You also want to consider whether the jobs are higher-paying, in trending upwards or downwards.
You also want to consider whether there is a diverse array of jobs or not. The more diverse, the better. When the reasons the real estate prices are so high in the Seattle, Washington area is that they have a lot of high tech, high paying jobs. You notice the direct correlation between real estate prices in jobs.
Feet on the Ground Criteria
Now that we have looked at a couple of the important factors that you need to consider in your investment property criteria from a bird’s eye view, let’s look at some factors to consider when our feet are on the ground.
You should have narrowed your search to certain geographical areas, hopefully, in your own city.
When you look at the importance of convenience to renters you want to become tenants of your real estate rental properties, are buyers of your fix and flip deals, you have to consider the convenience of the location of the investment property in question.
You want to choose a property that is close to major highways and/or roads so residents can quickly and easily get to and from work. We also want to choose a location that it’s close to shopping, grocery stores, schools, churches, gyms, community centers, parks and recreational hot-spots, and other important featuers people want and need in everyday life.
Crime Rates & Safety
Quality people want to live in quality areas. This means that the areas have low crime rates and are highly safe. So, choosing to invest into war zones, in hopes of becoming the next big slumlord, is a bad idea.
Instead, do your research on the crime rates and safety of the communities that you are considering living in to ensure they are safe areas.
Check out http://www.city-data.com/crime/ to investigate the crime rate of the area you are considering.
In general, the people who spend the most to rent or purchase property are those people with children. So, if you want to maximize your rents per property you rent out, then you must consider schools. You want to look at the ranking of the schools in the areas that you’re considering.
Compare how those schools rank with other schools in the city, because this is what your potential tenants are doing in their search for the best home.
There are many neighborhoods that are populated and are more expensive to live in simply because of the school districts influence on home pricing. However, please remember that sometimes, district boundary lines change.
So, you should talk with a local real estate agent who knows the situation best and can help you navigate these waters.
There are some areas that have more of an emotional appeal than others. Perhaps the area is located next to a quaint shopping development, or is known for its beautiful rolling hills, mature trees are other natural landscape.
If you could focus your investment property criteria on another factor that could become the X factor, perhaps it is the emotional appeal of the area you’re considering investing in.
All of these factors should be taken into account of your investment property criteria for high profit real estate deals.