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How to Choose Your Future Rental Property

CPManagement • Feb 11, 2020

What to Look at When Investing in a Rental Property

Are you searching for a location to purchase real estate in early 2020? You may find a location which is ideal for you, but not necessarily ideal for someone else. Your investment goals should determine where you invest in real estate. However, it can be difficult to find a suitable location if you have no limits geographically.

What you need to focus on are locations which are affordable to live and have a growing population and economy. The rental properties in these locations will offer equity growth and positive cash flow to their owners. So, if you can find a property in a real estate market like this, then it will be a lucrative investment for you.

Let’s explore the three main factors of a great location for investing in real estate

1. Population Growth

It is not easy to invest in real estate. The current value of a property and the demand for properties in that market are both important considerations to make. To figure out this information, see if you can find any areas which have experienced growth in recent years. If you find a growing area, don’t just immediately purchase property there. Any town or city with a lot of growth is bound to attract a lot of other investors too.

As a result, it may only take a couple of years for the real estate market to become oversaturated with properties for sale or rent. This will cause listing prices to increase in that market. Once that happens, it’ll turn buyers away from that market and cause the property values there to decrease.

It is better to focus on growth projections rather than current growth. See which real estate market appears to have projected growth over the next 3 to 10 years. If you can find a medium-growth real estate market, it’ll have more long-term sustainability. This means it can be popular both now and in the future.

2. Job Growth

When several reputable companies offer high paying job opportunities in a particular location, it motivates people to purchase homes there and move into them. That is why if you can find a location with a superb job market and at least one big company with a hub positioned there, then it is a thriving place to invest in real estate.

One good example of this is Amazon. They have established hubs in cities throughout the United States. Since it is one of the largest companies in the world, various cities are trying to compete to become the next hub location chosen by Amazon. Once a company like Amazon sets up a hub in a city, the housing market will skyrocket there because the hub will create more jobs and an increase in the population.

Investigate different areas and see if any building permits have been issued in them. Find out details about the plans and what is getting built. If you can discover this information before the official public announcements, then you could have an earlier chance of purchasing real estate at a lower price before the values increase.

Also look at current trends to see which cities will have the highest job growth.

3. Current Real Estate Prices

If a location is supposed to have promised growth, then don’t invest there yet. There are several real estate markets which have either inflated housing prices or high rates of vacancy. If you invested in one of these markets, then you’d be stuck with a house for a very long time.

A high vacancy can occur somewhere, even if there is a strong economy. If you own a property in a market with many other vacancies, then you’ll be competing with other property owners to rent or sell your property. If you happen to find a buyer or renter, then you’ll likely have to lower your price just to make your property attractive to them.

Conclusion

It is important to research prior to investing in real estate. If you spend a lot of money on the wrong property, then you might not be able to rent it out at all or for the price you want. This means no profits for you.

When you begin researching real estate in various markets, consider the finance options you have available. Go to Lending Tree and look for a mortgage offer there. If you want to consider alternative lending websites, try out PeerStreet or RealtyMogul. To clear away existing debt prior to getting a new mortgage, go to LendingClub to seek a personal loan or go to SoFi to seek student loan refinancing.

Once you’re done, study the projected growth of various housing markets and see if they will likely give you a profitable return if you invest in a house there. If you invest wisely, then you could end up with a house that earns you profits for the next several years.

After purchasing your new rental property consider hiring a Property Manager. There are many benefits of hiring a Property Manager that allow the owner to enjoy the benefits of owning a rental property but not the stress.

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