What is the Best Kind of Investment Property for You?

Part of learning how to get started investing in real estate is determining what type of investment property to look for. There are many options to choose from. The investor can buy houses, duplexes, condominiums or apartment buildings – and that’s just the tip of the iceberg. They can buy lots and build investment property or buy lots and rent them to renters who then build on them. They can make “in really good condition” a part of his/her search criteria, or he/she can search for a property that seems to be in rougher condition than it is, in order to negotiate a good price. They can go after properties with absentee owners with the hopes that they finds someone who’s trying to put his/her property out of his/her mind because he/she really like to get rid of it.

The possibilities are endless. The question is, which property is the right property?

Ultimately, the right investment property is the one that will generate the most money while not costing you an arm and a leg to be rented out. Getting a property up to speed might involve renovation to bring a building up to code – installing up-to-date appliances and that sort of thing. It might involve a fresh coat of paint, or even evicting some unwanted tenants. What the potential new buyer has to determine is, if the building’s problems can be repaired.

For example, in his book “The ABCs of Investing,” Ken McElroy writes about someone who purchased a property without ever viewing the site, and found himself saddled with several tenants who were not just bad. These people were dangerous. The investment property was in a bad part of town where the owner should never have purchased a property. When he finally got around to contracting Ken’s property management company, he had lost a bunch of potential income because of delinquency.

McElroy’s team fixed what they could. They got rid of the delinquent tenants and hired security for the building, but they couldn’t change the quality of the surrounding neighborhood. The property would never be one that renters with a lot of choices would choose to inhabit, based simply on its location. It would never command the rent that it could have if it just had been located somewhere else. Most of the building’s issues were just un-repairable.

The old saying, “Location, location, location” is very influential for a reason. Location might be the single biggest factor the real estate investor needs to consider when searching for potential properties to invest in.

Besides simple viability, the investor needs to consider how he/she wants to go about handling his/her investments. McElroy recommends that investors contract a property management company for their experience and to free the real estate investor to look for additional investments, but some people just prefer a more hands-on approach. This type of investor might want to consider purchasing property that’s little enough to manage on his/her own. Some people are unwilling having investors or partners and so will be restricted by that as well. In that case, less expensive and smaller is usually the best option for them.

In the end, McElroy also advises that the investor not assume they should start small. If they have learned enough to buy investment property in the first place, they can learn how to work with other people’s money. They should think about, however, what they are comfortable doing – or what they would regard as the easiest approach. The opportunities are almost infinite.

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