How to Compare Investment Properties

By eHow Personal Finance Editor

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Real estate as an investment is in most cases a fiscally sound opportunity—provided the price and property are right. As the maxim goes, "They are not making anymore land." Real estate is of finite supply, but a person needs to how to compare and contrast properties to choose the best investment.

Instructions

Difficulty: Moderate
Step1
Determine the sale price of comparable properties that were recently sold in the neighborhood. This will give an investor an idea of the market of the property. The most complete comparable sale information is available through any local real estate agent.
Step2
Ascertain the desirability of the property's neighborhood. Many issues factor into this comparison, including new construction, schools, crime rate and tax rates. The intangible value of the property will be greater if these issues are favorable.
Step3
Establish the amount of work that needs to be done to make the property up-to-date. Some properties will need almost no upgrading, but these properties cost market value or above. Typically, the best investment properties will need some work. An investor must determine if the labor and cost are feasible for a return on investment perspective.
Step4
Institute a comparable investment time frame for each property. Determine what type of investment each property is. One property may be better suited for a buy-and-hold strategy while another property may be better suited for a renovate-and-sell strategy.
Step5
Conclude what all of the cost factors are for each property and make a final decision. Factor in intangibles and tangibles to find the total investment potential for each property. After looking at the big picture from a cost-benefit perspective, an investor can make a prudent monetary decision.

Tips & Warnings

  • Be certain to include a 10 to 15 percent cost cushion in an investment property budget to cover unforeseen costs that will factor into the investment property renovation.

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eHow Article: How to Compare Investment Properties

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