A lot of people have built wealth by investing in real estate. And because of that, it may seem like an easy way to make a lot of money, but, as with any business, there are considerable risks involved. In addition, it requires that you have a good amount of cash. Still, investing in real estate is a sound approach that has the potential to make you a tidy profit – if you go into it with eyes open and an understanding of what it involves. Read on, then, to discover the 5 things you should know about investing in Salt Lake real estate.
1. Consider Location First
When investing in Salt Lake real estate, as with anything else having to do with real estate, the three most important considerations are location, location, and location. Location is just that important.
“The adage ‘location, location, location’ is still king and continues to be the most important factor for profitability in real estate investing. Proximity to amenities, green space, scenic views, and the neighborhood’s status factor prominently into residential property valuations. Closeness to markets, warehouses, transport hubs, freeways, and tax-exempt areas play an important role in commercial property valuations.”
When assessing a property’s location, you need to take a mid-to-long-term view and assess how the area is expected “to evolve over the investment period. For example, today’s peaceful open land at the back of a residential building could someday become a noisy manufacturing facility, diminishing its value. Thoroughly review the ownership and intended usage of the immediate areas where you plan to invest.”
A Salt Lake with experience in investment real estate can be a huge asset here. Your agent will know the area and how it is likely to change over time. To contact an agent, just call (801) 755-3865.
2. Don’s Skimp on Research
In a similar, investing in Salt Lake real estate calls for plenty of research, especially before you buy your first investment property.
“Depending on the clients you are targeting, you need to do proper research before buying your first investment property. Make sure that the property is situated in a location that will attract the type of clients you hope to sell or rent to, that it will reach the returns you are expecting and that it will appeal to the market.”
You also need to do plenty of research on the financial end of things as well. “Doing the proper research and using an analytical approach logically based on the financial factors, rather than considering your personal likes and dislikes, will surely help you in purchasing the best property. After all, investment isn’t about emotions; it’s about economics.”
3. Understand Valuation
And you need to understand real estate valuation because it profoundly impacts your ability to get financing. “Property valuation is important for financing during the purchase, listing price, investment analysis, insurance, and taxation—they all depend on real estate valuation.
Here are the three most common methods uses for real estate valuation . . .
- Sales-comparison approach – This method looks at “recent comparable sales of properties with similar characteristics.” It is the most common and is suitable for both new and older properties.
- Cost approach – This valuation method takes the cost of land and construction and then subtracts depreciation. It is used mostly for new construction.
- Income approach – This method is most suitable for rentals because it is based on project cash inflows.
4. Calculate Expenses and Profits
Similarly, before taking the plunge and buying investment real estate, you first need to calculate expenses and profits. In fact, experts in this arena suggest being a little paranoid and “considering every detail beforehand.
Suppose, for example, you intend to buy a house to fix and flip. “Start with calculating the money that you already have and what you can borrow before buying your first investment property. Next, calculate how much it would cost to purchase and renovate the house. Also, keep in mind the operation costs. Finally, estimate the price you are going to list your property for and cut out the expenses to get a rough estimate of the profit you stand to make. Honestly speaking, you may not even hit half of the estimated profit, but this calculation is necessary to keep yourself in the safe zone.”
5. Start with a Low-Cost Property
Also, industry pros advise starting with a low-cost property when you first buy investment real estate. This will lower your financial risk while you’re learning the business.
“Even if you are ready to invest up to a million dollars in your first investment property, it is always a good idea to go for properties that lie in the lower- to mid-range price brackets. Some experts suggest a house that doesn’t cost you more than $150,000. Don’t forget, you will need to spend more money on the renovation of the house before renting or selling it. . . . [K]eeping your investment as low as possible will help you stay in the safe zone. Even if you don’t hit the expected profits, you won’t risk losing too much on it.”
And Get the Professional Assistance You Need
Finally, when it comes to investment real estate, you should not try to go it alone. An experienced Salt Lake agent and the professional network she can bring to the table are almost a necessity. A good agent can help you navigate around the many investment pitfalls. So if you’re ready to get started investing in Salt Lake real estate, contact us today at (801) 755-3865.