Hunting for an investment property is an exciting adventure and there are detailed steps to take along the way. You’ll need to begin planning before the fun stuff can happen to ensure your project goes smoothly. Here are few steps to take to ensure you find the perfect investment property:
Set your budget
Before you do anything else, it is crucial to set a budget. This will help determine what you can afford. Your budget should invoke a “sky is falling” mentality, then add on a 25% contingency – this is not the time for optimism! Remember to include your closing costs and commissions. Your budget should include everything…EVERYTHING…from closing table to closing table. If you are acquiring a renovation loan, do NOT rely on the bank loan for 100% funding because banks are making your loan before any unforeseen conditions arise.
Narrow down your options
Once you have settled on a budget, create a list with what you want to buy and be as specific as possible. Certain items to consider are: What type of property (single family home, multi-flat, apartment complex, commercial building, etc.)? What neighborhood? What amenities are essential to your project?
Do your research…outside
Measure twice, cut once – the same analogy applies to investments. Research, research, research, THEN buy. Explore your target neighborhoods: talk to locals, visit shops, walk through parks. You may come to find that it’s not what you thought and decide to reassess your options. Determine if your target area has potential to grow in the market. For example, it wasn’t until a few years ago that Chicago’s West Loop became one of the most sought-after residential areas. The booming restaurant scene and relocation of corporate headquarters have had a huge effect – one you may not know about without talking a walk. Particularly in Chicago, some neighborhoods are “block-to-block”, meaning that one block may be more valuable than another. It’s not uncommon to see a fully renovated home in a hot neighborhood on the MLS not selling at a low price and be confused – a quick drive can show you that the next block is across from a park and this property is across from an industrial building.
Taking the necessary steps to find your next piece of real estate will help ensure long-term capital growth. If you want to learn more on how to find your perfect investment property, feel free to reach out to us.