How to decide if a property is a good investment?

Even experienced real estate investors sometimes doubt certain decisions. The real estate market is often unpredictable, which makes it hard to invest in the right place. In recent times, with the global pandemic affecting all spheres of our lives, picking the safest investment has become even more complicated. For that reason, we wanted to create a simple guide that will help you decide if a property is a good investment or not. Checking several aspects of this purchase and having a realistic approach will ensure you step into the market the right way.

Check if the investment will result in a positive cash flow

When thinking about a property, you want a positive outcome and a steady return. That’s why one of the ways to decide if a property is a good investment is to check if the rent will return enough money in the future. There’s a helpful technique you can use here – the 1% rule. Your property’s income should be at least 1% of your investment, so you can be sure you’re not losing any money.

Calculate the cap rate

Another essential factor you should consider when investing is the cap rate. The capitalization rate is the property’s potential for return. Here you will need some basic information about the place – maximum yearly income, the purchase price, and operating monthly costs. Find out your net income by subtracting the operating expenses and then dividing the result by the purchase price. The number multiplied by 100 will show you the exact percentage of the returns of your investment.

Check the condition of the property well

To be aware of the realistic value and any potential improvements you need to make, make sure you understand the property’s condition. Check the main items such as the roofline, drainage system, windows, etc. If there are any renovations you can easily do, you can try to get a discount. If there are more serious issues, maybe the property isn’t right for you

Compare the county appraisal value and the assessed purchase price

These two numbers can be different, so be sure to check them out. If the purchase price is lower than the selected county’s value assessment, you can be pretty sure that you’re dealing with a good opportunity.

Presence of professionals

The area you pick should also have real estate and moving professionals to help you out. Find a good realtor to introduce you to the local market, and then let azmovingpros.com handle the heavy-lifting for you.

Consider the local indicators

One of the ways to decide if a property is a good investment is to check the environment and some of the local key indicators of the desired neighborhood. These include job opportunities and population growth. If the area offers jobs for new residents, you can expect your place to sell or rent easily, which is why you should consider it as your next investment.