How To Tell If A Property Is Worth Buying
The market does not dictate property value anymore. The value of a property relies on accepted offers and the amount you borrow will reflect this. In other words, home value is determined on an appraiser’s professional opinion rather than the price you come up with. Here are some ways you can tell if a property is worth buying:
Consider the 1% rule
The best way to determine if a value is worth your investment is to use the 1% rule. The property you buy should give about 1% of the purchase price. This will ensure that you get cash flow that can capitalize your investment. Just be sure to evaluate what the rental rates are in the area first.
Determine the cap rate
A cap rate is the return rate of a property according to the capital it can generate. A 4 to 10% rate per year is a good range for an investment. This means you will earn well from it after purchasing it. However, consider this rate if you plan on selling the property in the future.
Consider the neighborhood
If you want to purchase a property immediately, consider the quality of the area as well. If you are looking for an investment in a high-end neighborhood, it should be easy to purchase. That means there shouldn’t be a need to do costly maintenance after the closing.
However, if you are looking for a reasonably priced property, do not consider areas that have issues. Bad areas bring down rental rates, attract bad tenants and reduce property value so it won’t be much of an investment. Plus, even if the area shows signs of improvement, it does not mean that you will make money from it. Therefore, make sure you research it beforehand and leverage experts like Loyal Partner Homes before finalizing your deal.