Purchasing a house as an investment is a whole different animal than purchasing a house in order to make it your home. The things that matter greatly when picking out a home don't matter so much when you're trying to make an investment. However, some things you absolutely have to look for and get right if you want to make money on your investment. More than one investor has seen their profits go down the drain by failing to look at property as a real estate investor should. Following are three things you should pay attention to.
The first thing you want to do when any property catches your eye is to check out the comps in the neighborhood. Comps are prices that neighboring houses that are similar to the house under consideration have sold for recently. The goal of looking at comps is to see if there's profit to be made or not. If houses are going very cheap or if property values are declining in the area, it's probably not a good idea to invest in the property. However, if the comps show that there is a lot of room to make a profit, you may want to find out more about the property.
In order to make a profit, you have to get the house for a great price. Once you know what you can sell a house for, you have to subtract what you'll pay for the property, the money spent on any repairs, and holding costs. To make sure you have enough wiggle room to do all of that, you may have to purchase a distressed property that doesn't show well and needs a lot of work. It will be very difficult to find a bargain that's priced low enough to work as an investment.
If the numbers are right, it's time to inspect the property. Ignore cosmetic issues. Pay attention to the bones of the home. Is the foundation solid? Is the home well built? Also, be sure to inspect big ticket items, such as the roof, furnace, and electrical system. Extensive repairs in these areas can really cut into your profit margin.
As you can see, there are several things you should consider when purchasing a property in order to resell it for a profit. Remember, you're not looking for a home, you're looking for a smart investment. The numbers must add up to a profit for you. For more information, contact local professionals like Keller Williams Realty River Cities.