The Most Important Factors for Real Estate Investing

Investing in real estate entails careful consideration of various factors to limit risks and maximize rewards. So, what is the most important factor to consider when purchasing a home? While the location is always vital, there are several other factors that might help you figure out if an investment is worthwhile.

Limestone Country Properties put together this article so you can look into some of the most important considerations that you should take into account before starting your real estate investing journey.

Property Location

The location of a property plays a big part in influencing its value, rental demand, and potential for appreciation. Accessibility to facilities, open space, picturesque views, and the popularity of the neighborhood all have a considerable effect on residential property pricing.

Proximity to stores, warehouses, transportation hubs, freeways, and tax-free zones has a significant impact on the property’s equity in the long run.

When evaluating the property’s location, you must consider the area’s projected mid to long term growth and how the area is likely to be developed over the period of your investment.

A serene vacant lot behind a residential area could one day become the site of a noisy factory or shopping center, reducing the value of the surrounding residential plots.

dragging a finger across a map

That said, it is best to look into the ownership and purpose of the immediate areas where you intend to invest so you can properly make a decision.

Contacting town halls or other governmental bodies who work in urban planning departments and have a say in zoning is one of the best ways to gather information about the future usage of the land.

This will offer you access to long-term regional planning and allow you to determine how advantageous or unfavorable the property is to your own investment plans. When choosing a property, make sure you consider hidden costs. As a property owner you want to avoid financial surprises.

Property Valuation

Property appraisal is an important part of real estate investment since it helps property owners, buyers, sellers, and lenders determine how much the property is worth. Property valuation is important in a variety of situations, such as property sales, mortgage financing, insurance reasons, and investment research.

The following are some common real estate appraisal methods:

  • Sales Comparison Approach: commonly used when comparing a particular residential property to similar ones that have been sold recently in the same neighborhood or area.
  • Income approach: based on projected revenue and is suitable for rental properties.
  • Cost approach: especially beneficial for new properties with few comparable recent sales.

Investment Goals

Given that real estate investments have a low liquidity and high value, a lack of a definitive purpose and strategy may result in negative outcomes. You could experience funding constraints particularly when you are paying for the property’s mortgage.

holding a stack of money next to a phone calculator

Below are four basic categories that you could take into consideration when defining your objectives and planning accordingly:

  • Buy and use: you will save money on rent payments while reaping the benefits of self-utilization and value appreciation.
  • Buy and lease: this gives both a stable income and value appreciation for the long term. Building a professional relationship is essential to handle any legal issues, and striking a balance in managing tenants and protecting the investment.
  • Buy and sell (short-term): this is typically done for quick and simple small to medium revenue. The acquired property is renovated and is sold at a profit once finished.
  • Buy and sell (long-term): this is usually focused on long-term value appreciation. This provides alternatives to long-term goals such as preparing for retirement.

Beware of Leverage

Loans are accessible, but can be costly in the long run. While they are a way you can finance your investment property, you do sacrifice your future money to obtain utility today at the cost of interest spread over many years. Make sure you understand the ins and outs of these loans and prevent high levels of debt, often known as overleverage.

Consider the following, based on your current and projected future earnings:

  • Select the right mortgage for your situation. When choosing one, beware of the potential risks involved.
  • Understand the mortgage lender's terms, conditions, and other fees.
  • Shop around for a lower interest rate with better terms.

Credit Score

Your credit score influences both your likelihood to qualify for a mortgage and the terms offered by your lender. If you have a better credit score, you are more likely to receive better terms, which can add up to significant savings over time.

an elderly person holding money and a credit card

Scores of 800 or higher are regarded as good and can help you find quality mortgage rates. It is always a good idea to work on improving your credit score in the following ways:

  • Pay off your debts.
  • Aim for no more than 30% credit usage.
  • Limit requests for new credit and "hard" inquiries.
  • Examine your credit report and contest any mistakes.
  • Pay your bills on time by setting up automatic payments through your bank.
  • Don't cancel unused credit cards that you aren’t paying fees for.

Real Estate Market

As with other sorts of investments, it is best to purchase at low prices and sell for a significant profit. Real estate markets can fluctuate, and it helps to be aware of current trends. Staying updated with real estate terms will be helpful for your investment journey.

It's also critical to keep an eye on mortgage rates to reduce your financing costs whenever possible.

Keep up to date on trends and statistics for:

  • Home pricing and sales
  • New buildings
  • Property inventory
  • Mortgage rates
  • Foreclosures

The Bottom Line

Investing in real estate entails establishing your financial goals and considering the above mentioned factors before finalizing the purchase. It can provide diversification and risk management to your investment portfolio and allow you to generate revenue.

If you are an investor looking to generate consistent income through rental properties, you can rely on Limestone Country Properties to turn your investment into a thriving business. We are dedicated to making your business a success.

Our team has worked with hundreds of landlords and managed multiple different types of rental properties from single-family homes to multi-family residences. We are a full-service company that will market your property, screen your tenants and take care of them throughout their tenancy. Let us know how we can help. Contact us today!

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Thank you Limestone staff for managing our 4 properties over the past 7+ years. Your professional service, prompt communication and attention to detail is greatly appreciated to ensure our properties are well maintained throughout the years. We are very glad to refer our friends to Limestone and look forward to many more years of continued support

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