When looking at real estate for sale, it can be difficult to find properties that will be profitable for the investor. This is especially true for real estate investors who are new to investing. Whether it's a property that the investor intends to flip or one that will be rented out in the future, getting a good deal is essential. The better the initial purchase price, the higher the profit margin down the road. Here are three tips for purchasing investment real estate.
The 2 Percent Rule
When it comes to real estate investment, rules of thumb are common. They are a great way to estimate whether or not a property is a good value. The 2 percent rule of thumb is one that real estate investors should be familiar with. Basically, the monthly rent from a rental property should be at least 2 percent of the cost of the property itself. Potential investors should look at the property's purchase price as well as comparable rents in the area in order to determine whether or not a property will make money as a rental. This rule of thumb can be very helpful whenever it's time to make an offer on a potential rental property.
Think Of The After-Repair Value
Another thing to consider when looking at real estate for sale is the after-repair value of the property being purchased. Fixer uppers are often considered to be good investments since they can be purchased at the low end of the market and then flipped at a profit. However, properly estimating the after-repair value is key whenever it comes to flipping a house or condo. Making fixes that are too high end for the neighborhood can cut into profits. Staying on budget during the renovation is also a key part of making money with this type of real estate investing.
Work With A Real Estate Agent
When it comes to finding deals on investment properties, having a good handle on how the local real estate market works is a must. For this, hiring a real estate agent can be a big help. Real estate agents have the detailed knowledge of the market that investors require. A real estate agent can show a potential investor properties that will work for them and take out much of the leg work. They can also show properties that have been on the market for a while and that may be good investments.
Investment properties are a great way to generate income. However, real estate investing can be tricky. Investors should consider the 2 percent rule and the after-repair value for potential rentals and flips. Working with a real estate agent can also be invaluable, especially for investors who are not familiar with the local real estate market.Share