No two investment properties are the same. The history of repairs, market conditions and the long-term growth potential of the area — as well as your own risk preferences — all factor into whether a property is the right fit for your portfolio.

1. Evaluate the local market
The market in which the property is located matters just as much — if not more — than the property itself. Analyze the surrounding metropolitan area to ensure there is a robust and desirable market to generate cash flow.

These factors can influence the long-term viability of an investment property:

School ratings
Net migration in and around the area
Details of the municipal government
Average resident happiness
New constructions that imply economic growth.

2. Analyze the area’s financial potential
If the market looks appealing, it’s time to take a deeper dive into the area’s economic strength. Are many investors entering the area?
Alternatively, does the area look like it is waning economically? 

While there is no way to know for sure if an area will boom or bust, it is important to mitigate the risk through due diligence. Perform a sales comparison to gauge your potential property’s value against comparable local properties, and create a projected cash flow analysis.

3. Consult other real estate professionals
It is wise to assess an investment property through multiple lenses, including perspectives other than your own. 
Consult with other real estate professionals, including fellow investors and local property managers who understand the market and already engage with your tenant demographic. This is particularly important if you’re unfamiliar with the region.

If you consult with a property management professional, ask them these three questions:

Do tenants tend to renew their leases year after year, or is there a lot of turnover?
Is the neighborhood desirable or up-and-coming?
Has the market been stagnant? If so, for how long?

4. Always conduct an inspection
General inspections, especially when handled by reputable professionals, offer insight into the costs of upgrading or even simply maintaining a property.

Without a thorough inspection, you may uncover problems later that seriously impact your cash flow. Instead of considering a property that needs a lot of work or doesn’t have an inspection on file, look for properties that have recently had an inspection, or get your own inspection done before making an offer.

It’s better to have a report in hand before deciding on a property, even if it means losing out on a fast-moving deal with too many unanswered questions.

Contact us at (480) 225- 2234 to get preapproved for mortgage while you look for the investment property of your choice. We can get you the best rates available and also discuss the loan choices that best meets your needs.