Will your chosen real estate property be profitable just as what you imagine it could be?
Investing in uncertainty will never bring you to a very profitable outcome. This is the reason why you also need to invest more time as well as effort to learn more as go along in real estate investment. It may be challenging as it may seem but to work with the real estate market by your side, that is where the profitable and real fun will come.
As you go along in this industry, you may have already noticed with the various properties being offered in the real estate market. Your investment decision may be for a townhouse, condo, multi-family home or even a single-family home. As an investor, your goal is to gain profit and to look for those properties that have high value and is profitable. But with all those mentioned types of properties, how will you be sure if you have invested in a lucrative property?
The answer to that is through identifying the most profitable property. How? Here are the tips that will lead you to identify the best property:
- Where is it located?
You really can’t go wrong if you choose a better location. The property’s location is an essential factor in everything that concerns real estate. Any real estate agent or even investor will advise you with the most important factors to becoming successful in your investing career. Those factors will be location, location, and location. It is repeated to denote its importance in real estate investment.
The location had that domino effect that will make or break the profitability of a certain property. It can affect the property’s appreciation, cash flow, rental income, operation costs, and its expenses, as well as its purchase price. This means that you can never go wrong on properties that are located in profitable locations. This is certain as the location will also determine how the investor can charge for the rent. If the property is located in a place or neighborhood that asks for a particular rent, then you must have it rented with the same price range.
When we say profitable locations, it tells about the high demand that it has for investing. If you have found a real estate that has the characteristics but doesn’t have that demand to be a rental property, then it is not profitable. To avoid this, it is best to choose the property that will attract your prospective tenants.
- Will it give a positive cash flow?
To make a profit is the main reason why people are choosing an investing career in the real estate industry. To achieve that reason, investors are looking for ways to make a profitable investment. Also, to make money, the property to be invested should have that positive cash flow. In investment property, the difference between expenses and rental income is called cash flow. Only those profitable investments generate positive cash flow.
To generate that profit, you need to identify if that property is profitable. How? You should be calculating the possible expenses and conduct a market analysis before you purchase that property. After you purchase, you should spend wisely. Also, planning for your finances will also help ensure that it will maintain the cash flow and generate income.
- Will the property’s value increase over time?
Aside from the positive cash flow, investors also make a profit with the property’s appreciation. It deals with the increase in property’s value for some time. If this property has the potential to increase its value over time, then the investor will have no problem selling it in the future, gaining more profit from it.
Appreciation works hand in hand with the property’s location. If the property is situated in major business hubs, near planned infrastructure development projects and in a place that is showing a potential economic growth, then these factors significantly indicate the property’s high appreciation.
- Have you taken note of its ROI?
Another factor that will affect the profit to be gained is about ROI or Return on Investment. This is no longer new to the industry as the most profitable real estate investment will record a high ROI. To know whether your property having it rented will be profitable, you need to estimate its ROI. This is done by computing the COC or Cash on Cash Return and Cap Rate or the Capitalization Rate.
The computation will not be as complicated as you imagine and besides, why bother computing it by yourself when you can use an online tool like an investment property calculator. Through this tool, you can already compute for an estimate on COC, Cap Rate, and even the cash flow. It can also aid you to get better ready to identify the profitable one.
- Will it go and match the investing strategy?
The most important decision that you, as an investor needs to formulate is with your investing strategy. Your strategy should match up with the property that you have invested in. Will it go along well with short-term rentals? What about the traditional long-term rentals? Sometimes, the investing strategy may work only for short-term and other times only suitable for long-term rentals. But if your property is suitable for both short-term and long-term rentals, then that will even be greater!
The market can be unstable and may affect your investing strategy, so what should you do? These changes are given and the better way to get along with it is to invest in a property that is suitable to both short-term and long-term rentals. The great thing about this investment property is that it allows investors to be flexible with their strategies without the risk of having their profits to get affected.
Now that you have already learned about the things to consider as well as the appropriate steps to take, everyone can guess that you are ready to make a purchase. Identifying the most profitable investment property can be hard but being knowledgeable with the help of these tips mentioned above, getting that profitable investment is guaranteed, 100%!