Although investing in real estate can be lucrative, understanding the potential risks and rewards is crucial to earning a return on your investment. If you’re considering purchasing an investment property, your financial success or failure can hinge on a handful of factors. Here are four key considerations.
1. Location. Be sure to choose a home in a neighbourhood that will attract high-quality tenants. For instance, look for homes in desirable areas near schools, hospitals, public transportation and retail stores.
2. Condition. While a fixer-upper can be appealing, be realistic about future costs. Renovating a completely run-down property can run into significant expense, cutting into your potential profits. Look for a home with “good bones” that will allow you to recoup your renovation costs.
3. Follow the one per cent rule. Many investors use the one per cent rule to gauge whether a property will be a good investment. For example, a home with a purchase price of $100,000 should bring in $1000 per month to be worth your while.
4. Property taxes and rates. Always factor in property taxes, rates and so on when purchasing an investment property. High taxes can significantly reduce your profits, whereas low taxes will allow you to keep more of your monthly rental income.
Consider consulting a local real estate expert to help guide you in making the best decision for your investment goals. They’ll be able to provide you with the most up-to-date information on market conditions and trends to ensure you make a smart decision.
