Should I Buy This Property For Development? Questions To Ask Before Committing

15/11/2018

When looking to purchase a property as an investment, real estate investors need to put themselves in the shoes of their future clients. Keep the needs of regular home buyers at the forefront of any potential purchase.

Investing in any form of property always needs careful deliberation. Rushing to buy real estate just because it seems like a good deal can be a bad idea. Proper research is critical to avoid any unforeseen problems or serious repercussions.

What to consider before buying

Even if you are experienced in buying property it is a substantial investment that merits preparation. Investing in marketable real estate will always be profitable. Buying a fixer-upper and spending even more to get it looking good will all be for nothing if no one else wants to buy or rent it. Here are a few things to keep in mind to make sure you always get a good deal.

Location Location Location

This saying has been and will always be very accurate for real estate as the location of a property will affect its value and marketability.

Investing in real estate that is close to schools, hospitals and shops will be a better choice than buying an isolated property. Favour areas that have a high demand and where the property value will grow.

A property can always be renovated and improvements can always be made, but it can’t be physically moved. Because of this, always think about the location you’re buying in first.

Double check for any liens

A lien is a debt made against the property. Some properties have tax liens, others have liens through financial institutions like banks. You can check for liens on a property since liens are a matter of public record. Perform a search through the county recorder or assessor's office.

All you need is the name of the property owner and the complete address. You can personally visit the assessor's office or search online.

Another option is to contact a title company and pay for a title search on the property. The title company would then inform their client of any liens on the property. Imagine buying a house but then years later discovering there is a lien on the property from several owners and deeds ago.

Hiring a title company can help avoid that kind of a headache. Make sure to purchase title insurance for protection against unforeseen problems on the title of the property.

Does it meet the 1% rule

The one percent rule only applies to properties that will be let out. Real estate is a profitable business only if the prospective property passes the 1% rule.

If the property can generate a monthly rental revenue of 1% its purchase price, then it is a worthwhile investment. If it isn’t likely to meet this one percent rule, seriously consider whether the purchase will still provide enough profit.

Safety first

When searching for the ideal investment, make sure to research neighbourhood crime rates. Ask the neighbours or better yet do a quick internet search on the crime rate of the area.

The overall safety of the area is essential, not only for the property but also for its future tenants or new owners. No one wants to live in an area that has a lot of break-ins and is unsafe for their family. You can also ask the local police department for performance and neighbourhood data.

Public Transport

Most people drive and own a car, but keep in mind that there are still many that either share a car or don’t have access to one at all. Some people heavily rely on public transport to get around and get to work, so need to have access to local bus routes or train lines.

Marketing a property that is far from any reliable form of public transport can be challenging. Select property that is easily accessible through bus routes or train stations. Decent public transport options means that your property is opened up to more potential buyers.

Funds

Investors need to buy a property that is well within their budget. Keep in mind that paying for the property is only the tip of the iceberg. The development and labour costs need to be covered by the budget as well.

Buying a property that you can't really afford is risky. Remember that development takes time - months or even years - so if you don’t have the funds to back your project you can find yourself in hot water quickly.

If you want to buy a property for development the potential return has to be substantial to make sure that your investment of both time and money has been worth it.

The condition of the property

Investors can get an even better deal depending on the shape of the property. Some investors prefer to buy properties that need to be remodelled. They aim to buy properties that don't have many photos on their online listing and haggle for a discount on the price.

Depending on how much work the house needs the owners may agree to let go of the property for a lot less than their initial asking price. Have the property surveyed to get an accurate idea of what needs work.

Conclusion

Selecting the best properties to invest in can sometimes be difficult. The guidelines listed above can help even novice investors choose the best real estate for their investment needs. Take the time and go through the checklist and always close on the most profitable real estate deal.

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