How to Invest in Income-Producing Properties
You have decided to invest money in an income-producing property. You are attracted to three small stores with apartments on top for sale. One is occupied with tenants, the other is vacant and could use some renovations, and the third is in a great neighborhood, vacant, with no maintenance required. With the prices and interest rates low, all three are appealing, but you can afford only one. Before making a decision, weigh your options to understand the property type that is best suited for you.
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Instructions
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Enroll in a class to understand income-producing properties. Learn tips on the following: using the income approach for appraisal values; breaking even against market pressures; qualifying for a loan; generating cash flow; identifying documents to determine the quality of the income-producing properties; protecting yourself in case of default in loan payments. Invest wisely in income-producing properties.
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Weigh your investment options. Decide on buying property to rent it out for monthly income, buying property for renovations to be resold for a profit, or buying property while prices are low for the purpose of selling when market values increase. Calculate the cost of renovations to resell the property. Calculate your affordable loan payments and terms. Weigh your expenses against your income. Consider your investment in time to find tenants, collect rent and maintain the property.
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Study real estate trends in your area to know when the time is right to buy and sell. Understand the value in different neighborhoods and property styles which are currently making money. Be aware of current trends and opportunities. Join clubs such as the website REIClub.com (see Resources), which provides information for each state through newsletters and forums to keep you informed on property investments.
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Visit your bank to discuss your down payment and financing options. Approach the bank with a rent roll to establish the income the property is generating, and an appraisal to show the property's value with comparable rents in the area. Speak to your lawyer to review your documents before signing.
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Tips & Warnings
Buy distressed property, such as foreclosures and repossessed houses.
Buy the worst house in the best neighborhood for faster appreciation than properties in other areas.
Buy residential property near a college, military base or other institution to have access to tenants.
