Today I’d like to talk to you about investment properties, particularly multi-family investment properties. When looking to purchase multi unit investment properties there are three very important factors to consider before parting with your hard earned money.
Look At The Cost Of The Loan Required
Number one is to look at your loan cost to buy the property, probably looking at the sales price versus the intake of rents and expenses on those properties or what we will consider the cap rate. Now obviously if you have really high rents and fairly reasonable sales price, your cap rate, your return on your investment is going to be good and consistently good. This is essential and should always be the first thing to factor into your equations when weighing up the pros and cons.
Examine The Condition Of The Property Before Parting With Your Money
Now number two thing that you want to look at is the condition of the property. Does the property have differences that may be previously they have not reported any maintenance. That one or two things could be happening there or the owner could not have done any maintenance and now you will be doing the maintenance on the property or number two, not being honest about the cost of the maintenance. So either way if there is any kind of difference in maintenance, you need to be really looking at that as a cost of the building or your property and the return on your investment.
Location, Location, Location!
And finally, number three that you need to look at is the location of the rental property itself. Is it in a good location? Where there are schools around, there is plenty of rental opportunities for renters or there is a lot of rentals in demand in that area. Or a uni-transitional area, a fairly busy area that is typically residential or easy to rent. Those are important points because they do determine the stability of your rents and your income and the return on your investment overall.
So those are just a couple of things to think about when you are thinking about buying a rental property and I think the most important thing is work with an estate agent or letting agent and hopefully someone that knows about investment property, rates of return and have purchased them themselves.
Have you ever purchased a multi unit investment property before? If so please let us know about your experiences in the comments section below.
Lee is a keen investor and property blogger. follow him on twitter @propertylee