Investing in a rehab property may be one of the most lucrative decisions you make, especially if you already have a prime location. A lot goes into property investments, so you’ll need to think strategically to reap a big return on your investment. To determine if investing in rehab properties is right for you, we’ve compiled a list of five factors to consider to help you make the right financial decision.
Consider the Location
Location matters when investing in a rehab property. Location will impact many factors, such as your budget, the type of property you invest in, and desirability. For example, you shouldn’t invest in a rental property in a location that doesn’t have high rental demand.
Your location will also determine the price, which can impact your return on investment. Study the area and the people who reside there. Understand their needs and wants within the community and build on that.
The Type of Property
Determining the right property for you and your finances is essential. Does your location need townhouses, condos, vacation rentals, or commercial properties? Not every investment property may be suitable, depending on your budget and intended cash flow.
You should weigh all the pros and cons of each property type on your list to determine if the investment is right for you. By carrying out market research, you’ll be able to see which types of investment properties are in high demand.
The Investment Purposes
What do you plan to do with the property? Knowing your property’s purpose will make it much easier to find the perfect location and property to buy. If you’re thinking about transforming a home into an office building, consider finding a property in an area with heavier traffic. Knowing the purpose will help you make the best financial decision.
Consider Your Budget
Your budget is very important to consider when investing in rehab properties. How much are you willing to spend on a real estate investment, and how flexible is this budget? You should also consider this when deciding if you’re investing in an existing property or a new build.
When developing a budget, don’t forget to include extra expenses and hidden fees. Be honest and straightforward with your team about your budget. It would help if you also looked into home rehab loans to help with the costs of your project, so you won’t have to pay out of pocket.
Understand the Risks
With investments come risks. Buying an investment property is full of risk, and it’s important that you know what those risks are.
Some of these risks include:
- You could have bad tenants, resulting in repair or eviction expenses
- You may not have the buyer interest you anticipated
- You may have to front expensive costs
- Property taxes could increase
However, don’t focus on the risks alone because you could reap great benefits! It’s important to note, however, that not every investment has a 100% success rate. Contact us at Val-Chris Investments today for more information or questions about our loans! We’re happy to help you on your journey into rehab property investment.