Buying investment property in College Station is a great way to make additional income for you and your family. To determine if an investment is right, different investors use different calculation methods.]. Before you make any large investments, consider our rules for buying investment property!
Location, Location, Location
A huge factor when buying an investment property is location. It is possible for you to change anything about your home, but you cannot change where it is built. Before you buy a house or invest in a real estate property, you need to find a neighborhood that people like and want to be in. No matter how great a house is, if it’s in a bad location, you are not going to get the profits you are looking for. So what do you want to see in a location?
- The location should be convenient, and close to easily accessible stores. People are also concerned with security, and as a result, the location must have a low crime rate. You do not want to have to deal with vandalism, theft, or dealing with bad tenants in a high-crime area.
- People don’t like hearing traffic noises everyday, and don’t want to have high traffic in the front of the home where their children might be playing. So it is better that the location is not close to main roads.
- You don’t want to have a commercial property nearby, because commercial properties encourage noise, traffic, litter, and vandalism.
- Closeness to schools. It is true that families want a house that isn’t too far from school so that their kids can easily get there. But, a location adjacent to a school will reduce the value of the properties. This is because there will be more traffic and kids loitering the area.
- You can tell it’s a good neighborhood if you see parks, shops, and restaurants nearby.
Know Your Numbers
To determine if a property is a good investment, different investors use different equations. One such method is using Cap Rate”. Cap rate is the division of your net income by the asset cost. For example, if you buy a house for $150,000, you rent it out for $100 per month, and also pay $200 monthly for expenses, the net income for a month will be $800 or $9600 per year. So to calculate the Cap Rate, you will divide the net income, which is $9600 per year, by the price you bought the house, which is $150,000. In this example, you would end up with 0.064 or 6.4 percent return on your investment. You should have goals in mind, and if the property isn’t meeting them, then you should consider a different house!
Another method used by investors is the 1% rule: The 1% rule states that if you are renting out a house, it should be bringing in at least 1% of your purchase price each month. This can change market to market, but it is a great guideline to use when determining the value of a house as an investment.
Some investors use a 50/50 rule to keep them on the right track. This rule states that 50% of the profits will go to expenses other than the mortgage. This includes repairs, taxes, and rental costs.
Don’t Get In Over Your Head
Some people purchase and own homes because it feels like fun or because they have seen it on TV. There is much more to owning a successful investment property. If you are unfamiliar with repairing a house, don’t buy one that needs too many repairs. Have the house inspected to ensure that there are no hidden repairs you will have to make. You don’t want to start a repair, only to discover there are several repairs that you are not aware of and not prepared for. If your team is full of people that have the same mindset as you, it will help your investment grow. Work with other people in the industry if you are a novice investor so that they can help you grow.
Are you interested in buying investment property in College Station? We can help you find what you’re looking for! Send a message or give us a call today! (979) 431-1663