The secret to making great profits in real estate investing is to the ability to spot opportunities where other people see problems. You need to evaluate every potential investment property while thinking of all the possibilities.
Think outside the box
Don’t just look for homes which are in good condition. The homes that are not in need of immediate renovation are usually in very high demand. A high demand means that that the homes will have high sales prices, thus a low profit potential for investors. You need to look out for cheap homes which no one else wants to buy.
Become an area specialist
Choose a specific geographic area to operate in and find out all the details that are necessary – how much cheap houses are selling for and which amenities are available in the area, such as shopping centers, schools and hospitals.
Specializing in one neighborhood is the secret to spotting great bargains. The more informed you are about the area, the faster you can identify a bargain when it presents itself.
Go for affordable environs
There is a huge market for cheap houses. Buying or renting an expensive home is out of reach for most people. While it is true that expensive homes come with a higher profit potential, such houses involve a higher risk if a tenant or buyer is not found immediately. Homes in expensive areas usually cost more from the onset. Such homes are also very sensitive to changes in the market conditions. In addition, finding repossessed homes, foreclosure homes, handyman specials and cheap homes in expensive neighborhoods is a very rare occurrence.
Find the right neighborhood
Avoiding very expensive neighborhoods does not mean that you should invest in run down areas. Most people live in run down high crime neighborhoods because they have to, not because they wish to. Would you purchase a good house in a bad neighborhood? Good neighborhoods usually experience rising investment property values, which is an indication of demand. If you can offer a great home in a good neighborhood, you will get more than enough buyers. You should also be on the lookout for other houses that are being upgraded. This shows that property owner have confidence in the area.
Select the right property
Find a house which blends in properly with the neighborhood. Avoid odd houses that are out of character. In addition, don’t go for investment properties that require major structural repairs. Major repairs are time consuming, expensive and lower your profits. Look for cheap homes that only need a cosmetic rehab. Your aim should be to upgrade at a minimum cost so that you can make a good profit. This profit can be used for purchasing your next property.
Consider minor layout changes. Avoid properties with bad or impractical layouts. If you can enhance the layout with minor, inexpensive changes, you can make a good profit with a bit of extra work.
Save money with inspections
You should make a final deal only after the investment property has been thoroughly inspected. The inspection will reveal what kind of structural repairs are needed, and therefore whether the deal is worth it. A few hundred dollars spent on inspection could potentially save you thousands.
