How to Tell if a Property is a Good Investment
You're driving down the road when, all of a sudden, there it is a disheveled property in the middle of an unkempt lawn. You can tell, just by looking at it, that even though it may need some new paint, new shutters and maybe even some work on the front porch, it is a gem of a property. You also can't help but notice the best thing, the For Sale By Owner sign in the middle of the yard. How do you tell if this property is the perfect fixer upper?
First, ask yourself why you are buying the property. There are several options: The fix and flip, the reantal, or as a home of your own. There are different things to consider for each one of these optons . Let's just assume, for the sake of this article, that you'd want to buy this property and flip it for a profit.
How Is The Neighborhood?
Before you waste any precious time, take a look at the surroundings. The three main factors for selling real estate are location, location and location. What is the location like' No matter how nice the property is, you'll have a hard time selling it in a bad neighborhood. That doesn't mean that it's a bad property - depending on how low a price you can bargain, you still may be able to make a decent profit from it.
Find out everything you can about the area. Is the neighborhood going through transition period' A neighborhood that is going through a revitalization can be a great place to invest, as long as the upward momentum continues. An area that is on the outskirts of new development will often benefit from that as well. You might want to pass the property by if you notice signs of the neighborhood declining. If you can see that the neighborhood is slipping, so will prospective buyers.
Are there 'amenities' nearby? Some neighborhoods have public pools for the residents of that particular neighborhood, or parks and picnic areas. Depending on the neighborhood you may have other amenities including a neighborhood school with a good reputation, a corner store within walking distance, or a park right down the street.
How Is the Price?
Is the home listed with a Realtor, or is it a FSBO? How realistic is the asking price? Is it in your price range? Can you work out a low or no-money-down financing option? How open to negotiation is the seller? Will you be able to realize a profit after making needed repairs?
How is The Condition Of the Property?
This is one of the most important tests. You need to make sure that the property you're looking at buying doesn't need any extensive and expensive repairs. It should be structurally sound, without any major plumbing or electrical problems. A fresh coat of paint, flooring, and landscaping are all things that you can handle yourself as they are fairly inexpensive and easy to do. If the property requires more extensive repairs, it will cut into your profit, or eliminate it altogether.
When you view the property, don't leave any rocks unturned. Check and double check for indicators of
hidden problems. Here are a few things to look for: Moisture stains on walls and ceilings could indicate plumbing problems and/or mold problems.
Little piles of sawdust near corners or woodwork could mean termites.Separations between floor and wall, especially outer walls which could indicate structural problems.Lift tiles in suspended ceilings to examine the ceilings above for loose plaster, moisture stains and other
indications of problems
Is the Title Clear?
Last but definitely not least check the title. Make sure there are no leans or attachments on the property that could cancel the deal. If there are, and you still want the property, work out a conditional sale, where your purchase is contingent upon the liens being satisfied.
If the property passes all of the above tests with flying colors, congratulate yourself. You've got yourself an investment property that could turn a pretty profit for you.
The author, Roy White, and his wife have over 28 years experience helping people buy and sell Las Vegas real estate. They are also investors themselves. For questions or comments please call Toll free 1-866-374-3444 or e-mail Roy and Shirley at CENTURY21WHITE@aol.com
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