2 Tips For Evaluating Single-Family Homes For Investment

Posted on: 24 April 2020

There's never a better time to invest in real estate than when the interest rates are low. If you're handy or know people who are, single-family homes are a great place to start as the savvy investor has the potential to gain instant equity if they are willing to put in some work. Here are two factors to consider when looking for the right investment property.

1. Expand Your Definition of Ideal Location

Experts often recommend buyers who are looking to flip a house find the worst house in the best area. And while this can be true, it's not the only way to find an investment home. Do your research in every neighborhood in each city you are considering buying property. Some neighborhoods may be currently run-down but may be on their way up in the very near future.

For example, the city may be offering up cheap homes in an older neighborhood in the inner city. You may be able to purchase two or three homes for the price of one single-family home in another area of town. If other investors do the same, you will soon have valuable real estate in an up-and-coming neighborhood rather than a dilapidated one.

2. Consider Rental Potential

Many real estate investors prefer to buy an undervalued home, make improvements, sell it for a profit, and then move on to the next one. In some cases, it may make more sense to keep a property as a rental unit instead. In some areas of the country, communities may be booming, but have a shortage of single-family homes that are affordable for young professionals or families. These areas may benefit the real estate investor by providing affordable starter homes as rental properties for people who don't want to live in an apartment complex.

Look for small homes that offer amenities such as small yards, proximity to schools and grocery stores, and a safe community vibe. This will ensure you always have a pool of interested tenants. Just be sure to choose a property that will demand a higher monthly rent than the combined expenses of the mortgage, interest, insurance, and maintenance payment.

If you don't need an immediate profit and can afford to keep your money tied up long-term, the residual income you collect each month from a reliable tenant may be more lucrative. When you do decide to sell, the property value will likely have appreciated, netting you even more profit.