Real estate investment offers a lucrative opportunity to build wealth and secure financial stability. However, it also comes with its fair share of risks. To maximize your chances of success and minimize potential losses, it’s essential to adopt a strategic approach to property investment. In this article, we will explore four key principles that can help you navigate the real estate market with confidence and never lose money.
Rental Rates > Mortgage Payment
The main reason this is important is because life changes constantly. Say you just bought a house in a great neighborhood but you are being relocated to Nashville. Say home prices have dropped by 10% since you purchased and if you were to rent out the property you would be doing it for a $200/mo loss.
Since you are unable to rent the property for more than the mortgage and you are having to move. This is the situation where you might be stuck taking a loss on the home.
A great way to check rental rates would be through Zillow. It’s free and simple!
Universal Appeal: Invest in a General House
When investing in residential real estate, the aim is to attract a wide pool of potential buyers in case you decide to sell in the future. Investing in a specialized or niche property might seem appealing, but it could limit your market and prolong the selling process, potentially leading to financial losses.
Instead, opt for a more general house that appeals to a broad range of buyers. Focus on features that are universally desirable, such as 3 bed 2 bath, a one-story home, good school zones. A property that is a 3 bed 2 bath and one story absolutely appeals to all age ranges and most family sizes.
Location: The Holy Grail of Real Estate
The importance of location in real estate cannot be overstated. A prime location can enhance the value of your property and shield you from market downturns. When searching for a property, prioritize areas with strong economic fundamentals, access to amenities like schools and parks, proximity to major employment centers, and low crime rates.
Trends may come and go, but a good location remains a timeless asset. A property in a desirable location tends to appreciate more consistently and experience greater demand, making it a safer long-term investment.
Avoiding Over-Improvement: The Expensive House Dilemma
It can be tempting to purchase the most luxurious house in a neighborhood, believing it will fetch a higher price when reselling. However, this approach is often fraught with risk. Over-improving a property to stand out in the neighborhood may lead to an inflated purchase price that does not align with the market’s realities.
When evaluating a potential property, focus on properties that align with the value of neighboring homes. An excessively expensive property may struggle to attract buyers when you decide to sell, as most potential buyers will likely opt for more reasonably priced options in the same neighborhood. Aim for improvements that enhance the property’s value without overstretching the local market.
Improving Value: Best Areas to Focus on
- Curb Appeal, There is nothing more important that a good deep clean, and making your property present to the best of it’s ability. Make sure to remove all family photos and go with general paint schemes and colors.
- Landscaping, is the single most important curb appeal improvement. On average every $1 you spend on landscaping will return $1.10 in value when you go to sell.
- Bathrooms, come in 2nd and on average for every $1 you invest will return $1.02 when you go to sell.
- Kitchen, Kitchens are beyond important to a properties value but can tend to become very expensive if needing to move walls and fixtures. On average every $1 you invest in remodeling the kitchen will return 98 cents.
I’m sure this article has sparked a couple more questions you now have. Please give us a call and we would be happy to help in anyway we are able. You can reach me on my cell at (205) 568-2705.
I look forward to speaking with you!