A good investment property is a purchase that can generate passive income for decades. Unfortunately, when seeking out their first properties, many first-time buyers fail to do their homework and wind up making unwise decisions. Given how much capital goes into the average investment property, it’s only natural that you’d want to get the most for your money, and with the following tips at your disposal, you should have no problem doing just that.

Make Sure the Property Has Been Thoroughly Inspected 

Purchasing an investment property that hasn’t undergone a thorough inspection from a certified professional can result in a number of undesirable consequences. For starters, in the absence of a professional inspection, you may not be able to get the property insured. Secondly, forgoing inspections dramatically increases your likelihood of discovering outstanding issues with a property long after the sale has gone through. So, no matter how eager you are to expediently complete a deal, you’d do well to slow things down and enlist the aid of seasoned property inspectors.

Furthermore, it’s important to understand that a personal walkthrough – regardless of how detailed – is in no way a suitable substitution for a formal inspection. There are a variety of issues that non-professionals are unlikely to look for, much less be able to identify. Additionally, buyers have nothing to lose by making inspections a prerequisite for purchasing investment properties. In fact, depending on an inspector’s findings, you may be able to request a significant reduction to the seller’s asking price.  

Look for Properties in High-Demand Areas 

It should come as no surprise that properties found in areas with robust demand for housing tend to be more profitable than properties located in areas where demand is minimal. This means that even if a property has ample amenities to offer and was painstakingly maintained by its previous owners, an unfavorable location stands to dramatically diminish its returns. 

As such, you’d be wise to seek out properties in areas with strong local economies, large populations, favorable growth projections and healthy property values. So, before committing to purchase an investment property, take care to do some research into its location. Depending on what you find, you may come to realize that certain properties simply aren’t worth your capital, regardless of how nice they are.    

Seek Advice from Experienced Investors 

If you’re relatively new to real estate investing, it’s in your best interest to seek advice from investors with ample experience. For example, if friends, family members or anyone else in your usual circle has owned or managed an investment property, you’d do well to reach out to them in advance of making your first purchase. These individuals can prove helpful at distinguishing profitable investments from unprofitable ones, identifying the most opportune investment locations and answering the question “ What happens to real estate during inflation?”   

Prepare Yourself for the Responsibilities of Being a Landlord 

Although investment properties are typically considered sources of passive income, this doesn’t mean you can simply sit back and expect a property to manage itself. As the owner, you’ll be tasked with a wide assortment of responsibilities. From maintaining good relationships with tenants to staying on top of property maintenance, many landlords have a lot on their plates.

So, if this is your first time managing a rental property, take care to study up on what your responsibilities are, how to keep tenants happy and your state’s renter laws. Going into this role unprepared is liable to cause both you and your tenants a fair amount of stress and frustration, facilitate low renter retention rates and potentially even get you in legal trouble. 

When it comes to long-term investments, rental properties are among the most profitable ones you can make. Still, this doesn’t mean that every property in which you have the opportunity to invest is going to generate healthy returns. In fact, in the absence of the proper research and preparations, an investment property can lose you more money than you ever stood to make with it. Considering how much money is tied up in the typical investment property, wanting to see the highest possible ROI is perfectly understandable. And to help bring this about, make sure to put the tips outlined above to practical use.

‍