If you’re thinking of getting your real estate investment toes wet and buy your first property there can be a myriad of considerations. Does the property cash flow? What type of mortgage should I get? How much down payment should I have? And you’ll also ask yourself, “What type of property should I buy?”
That’s a fair question. You want to be able to both afford the property by having the renter make your mortgage payment for you but you also want to have a property that is attractive to future tenants. Is there a perfect property to buy?
That depends precisely upon where you’re buying. For example, by driving through a prospective area pay attention to the types of properties that line the streets. Are the properties mostly single family homes? Do you see an occasional duplex or fourplex in the neighborhood? Are there apartment buildings nearby?
Buying a property that you intend to keep needs to have a low vacancy rate. You always want to have a rent-paying tenant and one of the ways to always have a rent-paying tenant is to own a property others want to rent. That makes sense but it’s more obvious when looking at properties that seem out of place. Does your potential purchase “stick out” compared to other property? Is your new investment the only duplex in the entire neighborhood?
When evaluating an investment property, the best type of property to buy might be very similar to the surrounding real estate. If most of the homes are single family homes then you know there’s a demand for single family homes. The same is said for a duplex or fourplex property. You can tell a demand for your potential rental if there are other rentals in the area that match yours. And further down the road should you decide to sell?
If your real estate is similar to other properties in the neighborhood it will be easier to sell and easier for a buyer to obtain a mortgage. Lenders like real estate to be similar in nature in any particular neighborhood. Don’t go against the grain; go with the flow. Buy what’s renting.
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