All real estate has one common theme that buyers encounter before decisions to purchase are made. This common theme is a real estate listing. Because all properties are listed in similar ways, being able to get past the basic photos and purchase price could help investors see the profit potential of the home. There are ways that can be used to analyze the properties before purchases are complete.
4 Factors Used in Analyzing Investment Properties
1. Past Sales History
2. Neighborhood Search
3. Future ROI
4. Interior Amenities
Review Previous History of Sales
One good thing about real estate transactions is that deed transfers and sales are public. New investors who know where to find quality information can use this data to help with all future purchases. Every property has a sales history that can be reviewed at the county level. Reviewing past sales history can reveal a lot of useful information.
Properties that are continuously sold over and over again could be a sign of a problem. From maintenance issues to lack of available tenants, properties can be on the market for reasons other than a seller wanting to release the property. Evaluating property sales records with a sharper eye can be helpful.
Explore Around the Neighborhood
Every photo of a property for sale is likely the absolute best photo available. Photos are what draws in many investors to purchase available properties. Because photos can be deceiving, it is important to explore around the neighborhood where homes are available for sale. Not every home is in a prime location. Schools can be far away, crime rates can be higher and surrounding homes could be in poor condition.
Investment properties are purchased to rent to tenants in hopes of earning a return on investment. Renters who will not rent properties for reasons not displayed in an advertisement can be one risk factor to consider when evaluating listings.
Estimate Future Investment Returns
The cap rate of a property is only one measure of the income that could be earned from a property. The selling price is one portion of the information that can be useful from property listings. Knowing if other rental properties are included in the area can be helpful when estimating the rent that could be charged.
Properties that are attractive to individuals and growing families are often the best homes to invest into. Well manicured neighborhoods mixed with a growing economy are signs that future ROI will be strong.
Know the Interior of a Home
Not every property is listed with all inclusions at the time of purchase. Some photos are taken of interior rooms with tenants in place who will vacate the home upon initial sale. Some of the appliances might not be included in the price of sale. The different types of properties available can often dictate what is included in the interior.
Homes that are flipped and sold to investors can be empty inside apart from basic toilets, bathtubs, sinks and basic carpeting. A turnkey property can often include full appliances that come with the home upon sale. Knowing the difference in property type and what is included with the sale can be a huge difference in the future ROI of the home.