How Do You Determine If a Multifamily Property is a Good Investment?
When investing in real estate, location is key. You want to be sure that you’re investing in a property that will pay off and manage to generate a positive cash flow. That’s why the first thing you need to do before investing is to understand the basics of real estate – location, location, location! Since different areas of a city can vary widely in terms of rental returns, it’s important to focus on the key indicators, such as income, to get a good sense of how profitable or unprofitable a particular property is likely to be. The indicators below will help you determine how valuable – or how cheap – your investment might be:
Location is key. When investors talk about the value of the real estate, they’re usually referring to the location of the property relative to other properties in the area. Most real estate investors will argue that good location is the most important factor to consider when valuing a property. After all, the closer you move to the city center, the more likely you are to find high-end office space, retail space, or a combination of the two. The opposite is generally true for cheaper properties, which are more likely to be found in desirable suburbs or outer areas of the city. You can use mapping tools to determine how close you are to the amenities you need – like restaurants, cafes, fitness centers, etc – as well as how near you are to the attractions you might want to visit – like museums, art galleries, etc. Since you can’t measure smell, the best way to determine location is through the eyes, and you can use this tool to analyze images of your potential investment.
Depending on what you’re looking for, the location alone isn’t enough. You also want to consider the area around the location you’ve chosen. Does it have anything else worth considering? Are there any other properties nearby that you should know about? Does the area have a good reputation in terms of safety or are there any criminal activities that you should be aware of? These are all questions you need to ask yourself before committing to any kind of real estate investment. Since most people don’t have the time to walk around a city searching for the best locations for their investments, they hire real estate agents to do it for them. You can use the above questions as a starting point for your own research. You don’t want to make the mistake of buying a property in a low-income or dangerous area without knowing anything about it.
Density is one of those tricky subjects when it comes to real estate. You want to make sure that you’re not getting swindled by a property located in a low-density area, where it’s not easy to find sufficient parking spots or nearby shops. These are all important questions you need to ask yourself before committing to any kind of real estate investment. Since most people prefer to keep their cars and use public transportation instead, high-density areas are almost always less crowded than low-density areas. If you can find a balance between the two, you’re likely to end up with a good property. Sometimes, however, less is more. You might end up buying a property in a low-density area that gives you the privacy you need and also has the advantage of being close to parks, restaurants, and other amenities – like shops and parking lots.
Since different properties can have different rent levels, it’s important to look at what other people are paying for the property you’re interested in buying. If you have the budget for it, consider paying a bit more for a property in a good area that currently has a high demand. That way, you’ll be sure to get your money back – and then some! You can use online resources to compare rental returns on different properties. This way, you can find out how much you’ll actually need to spend – both in upfront costs and in monthly rentals – to ensure that you’ll eventually make a profit. Since most people are still reluctant to spend money on random properties they find online, use this resource as a starting point for your own research. Remember location, location, location!
Income is something else. While most people think about cost when it comes to real estate, you also need to make sure that you’re not buying a property in an area where the income isn’t sufficient to support the costs you’ll incur. The cost of living is generally higher in big cities, so if you can find a way to make decent money there, consider moving out to a smaller city where the cost of living is lower. If you can’t find a way to make decent money, then consider looking for a property in an area where there is already a lot of demand – like near a university or a professional sports team – to ensure that you’ll get your money back with interest. Since most people aren’t willing to spend money on a property they find online, use this resource to compare income levels in different areas of the city. This way, you can find out how much money you’ll likely make from a particular property – or if you should even bother buying it at all!
Above all else, try to find a real estate agent who is known to be honest. If you find one, you can be sure that you’re making the right decision and won’t end up with something that’s been misrepresented. With so much information floating around online, it’s easy for a dishonest agent to create a false impression – especially since the information is often so darned accurate!