Wednesday, November 2, 2011
How to pick the area you want to buy your investment property in. It doesn't have to be your own backyard.
Is your city or area a good place to invest? If you don't think so, then why would you bother? There is always an area of the country that is doing well real-estate-wise or is about to see some good things happen because of increasing employment, infrastructure changes that are going to attract more people to live there etc., regardless of what the media portrays. If we just listen to the news and don't filter the dribble, we are doomed into an existence of negativity and inaction.
We all want better returns, but when it comes to understanding what truly is a good investment and what isn't, CAP is only part of the picture. A high CAP may well be true, but you have to make sure that the area that the property is in has for the most part, good tenants, is in a good neighborhood and if possible, invest in properties that have higher rents because the lower rent areas do give more trouble by statistics. You don't want a high CAP in an area that has plenty of crime and related problems because you'll be dealing with those problems for the most part with YOUR pocket book...so that high CAP rate you thought you were earning gets pared down to something much lower, and then you're wondering why you even bother investing in real estate. Don't fall into that trap.
Just because an area looks good, don't be fooled. You need to understand the investment landscape, especially if you don't live in the area you're looking in. Finding a trustworthy broker or realtor is something you really should consider, who is far more familiar with the area than you. Beware of unscrupulous brokers and realtors who only want one deal from you and they want to sell you the first thing that they think they can get you to buy. This is not the kind of person you want to deal with. You need to work with someone who takes your well being and requirements as prime focus, and not theirs. If they are respectable and do a good job for you, they will earn their commission regardless, so be on the lookout for that really good person who will help you make money.
Make some phone calls, go on the mls and/or ask around who is the best of the best and then contact them. Meet with them and explain what you want to do and ask for guidance. Then, do your own research before you decide on a neighborhood in the city you're looking to invest in, and it most certainly doesn't have to be in your own. You just need to be careful. Look for good employment numbers, an area that is gaining employment or is at least stable over the past few years. Look at the demographics of the people who will rent in the area or your particular average client base for further confirmation.
At any given time, there are markets that are appreciating, or are just about to do so. If you don't know anything about emerging markets, you may want to pick up the book, "Emerging Real Estate Markets" by David Lindahl. David also wrote a book for Donald Trump on Commercial Real Estate Investing, so he's well qualified to explain Emerging Markets and Commercial Real Estate Investing. Both books are worth the read and it's a really non-technical read that almost anyone can understand. I just want to finish with noting that I am in no way being compensated by David Lindahl, Donald Trump or their associates in promoting these books. I have read them, and the information is superb, and I'm simply passing on this referral for those that wish to read them as well. All the best until next time.