How to Properly Analyze Investment Property

KEY LARGO, Fla. - May 20, 2015 - PRLog -- Per Sally Stribling, Top producing Real Estate Agent in the Upper Florida Keys, “There are many who would embrace the opportunity to invest in a rental or vacation rental property.

It’s widely understood the greatest aspect of real estate is its appreciation. Over time, real property grows in value while any debt leveraged against the investment is amortized. The equity gain is, over the long term, steady, upward, and unending.

This is why real estate is a sound and profitable investment.

However, just like a mutual fund or single stocks, though these too rise in value over time, can fall in value. Although these can be temporary decreases, the net impact can be emotionally and psychologically devastating.

In the financial world, this phenomenon is referred to as a “paper loss,” because it’s precisely that--no real loss on investment is realized until the assets are sold. Real estate presents a similar, but different problem, and, it comes at the buy.

When Money is Made in Real Estate

Unlike stocks and mutual funds, the money you’ll make in a real estate investment is at the buy. The time of purchase, and, the amount, is critical to having a worthwhile investment. When you buy an investment property, you’re not just purchasing a single residence, you’re buying into the neighborhood.

No matter the condition or features of a property, if it isn’t in a good neighborhood, it won’t be a good investment. This is why it is paramount you properly analyze an investment property before you make it an investment.

How to Properly Analyze an Investment Property

To properly calculate the worth, value, and income of an investment property, you must understand and have a clear and sound set of calculations. Some are estimable numbers, while others will be educated predictions.

Here are the factors necessary to properly analyze and investment property:

1. Evaluate the neighborhood. Though previously mentioned, this bears repeating because it’s so important. The value of a home will be dictated by its location. This is the reason the cliche, “location, location, location,” exists. It’s quite accurate, and telling, because a great home in a mediocre or less than desirable location will never appreciate to its full potential.

2. Know the associated costs. The purchase price is only one of many other expenses. There are taxes, insurance, maintenance, repairs, and renovation costs. Then, there are other expenses, such as vacancy periods and replacement costs.

3. Be realistic about the purchase. If you’re taking out a mortgage, you’re taking on inherent risks--the better your cash position, the better the investment.

4. Never overlook flaws or distrust your instinct. There are hundreds of properties which are currently, or soon will be, on the market. Don’t make a decision to buy simply because of the “timing.”

5. In addition to these, be ready to be a landlord. This isn’t a job for everyone and you’ll have to be comfortable with managing a property and dealing with all kinds of situations.

Sally Stribling, Broker/Associate with Coldwell Banker Schmitt Real Estate Company, specializes in the sale of fine Homes and Condos in The Florida Keys.

Sally provides buyers and sellers with in-depth professional assistance in the sale and purchase of residential property. If you are interested in buying or selling a home, and want the professional assistance of a seasoned expert, who will work diligently in an effort to satisfy your needs, please call Sally anytime at 305-453-7552 or see her website at http://www.keysbestproperty.com