Property investment is a commitment that can make or break your financial health. If you are a first-time property investor, the sum you will be putting in may mean a lot, meaning it is possible to lose everything if you do not perform proper research. You must be willing to put in the work to know about the location, the history of your developer, the current market, as well as the condition of your property and lot.
Corniche Capital President David Ebrahimzadeh emphasizes the importance of due research for his fellow investors. It is not only advised but ultimately necessary, especially when you are eyeing property investments that you want to flourish.
In this post, David Ebrahimzadeh further discusses the reasons why research is essential for all property investors.
Provides a Full Picture of Potential Earnings
One of the essential facts in property investment research is your current market. Are there businesses and other residents in your chosen location? Is it a booming vacation district? Are there employment opportunities nearby? You have to consider some things whether you are about to purchase a residential, vacation, or commercial property.
The market research will determine key factors of cash flow within your investment, such as:
- Value appreciation: In a competitive buyer or renter market, you can see the value of your property continue to rise in terms of purchasing or leasing.
- Frequency of renters and leasers: A good investment will yield long-term or frequent renters and leasers for your property.
- Market quality: A good market will place high-quality bids when you are selling or renting a property, and you will see great offers for your investment.
Avoiding Pitfalls in a Faulty Property
Another key area of research is determining the history of the lot and property you are investing in. You can hire an expert property evaluator or inspect it yourself if you have the experience to determine if there are faults within the property or land you are investing in.
Some investors will be shocked to discover that there are broken pipelines, uneven foundations, faulty electricity wirings, or other costly repairs (some even beyond repair) that can make your investment less profitable.
It is also essential to know the reason for selling (RFS) of the previous owner if you purchase a pre-owned property. This can give you an idea of what hidden pitfalls you may encounter if you own the unit.
Understand Payment Schemes and Financial Capacity
It is also critical to know about the payment scheme that your potential property owners allow. Some examples of considerations for specific properties include:
- Foreclosed properties: Are they accepting bank financing, cash, or other financing methods?
- Condominium units: How much of a down payment do you need before moving in?
- Residential property: What are the interest rates from your chosen competing lenders, and can you pay these in the long term?
By asking these property-specific questions about payment schemes, you can financially prepare for your investment in the short and long term.
Better Insight on Location Potential
Someone leaning into rental investment properties should do due research on location potential. The location potential, similar to the market, is what gives your property added value. If you are going for locations with ongoing developments, this is usually a good sign.
Some also consider these indicators of a location with great potential:
- The influx of people: Are there people visiting, working, or staying in the area? When there is a high influx of people in the location, you can expect more and higher-quality renters.
- Accessibility to needs: The availability of hospitals, schools, recreation centers, and other indicators will give you better chances of finding quality renters in your location.
- Media exposure: This may seem trivial, but if you are planning to invest in a vacation rental property, the media exposure in a certain location is important because it gives you an idea about the area’s popularity (or rising thereof).
Comparing Properties
If you are set on finding a location, a significant step in doing investment research is comparing your considering properties. You can compare on several areas such as:
- Income potential: High-end vs. low-end, the interest of buyers, frequency of leasers and renters, etc.
- Property quality: Potential repairs, long-term appreciation, neighborhood quality, etc.
- Personal preferences: Number of rooms, added facilities, interior divisions, distance to amenities
Comparing your chosen properties through a chart will allow you to discuss with experts, your co-investors, and other people whose insights you value to lead you to the best choice.
Investing in Properties? Researching is the First Step
Researching may seem daunting, but it is important to know that it is an action step for property investment. By ticking all the boxes of things you have to consider, you will have better chances of experiencing success in property investments.
