Part of learning how to invest in real estate is figuring out what kind of property to look for. There are many different choices. The investor can purchase houses, duplexes, condominiums or apartment buildings - and that’s just the tip of the iceberg. He/she can buy lots and build investment property or purchase lots and rent them to people who build on them. He/she can make “in really good shape” a part of their search criteria, or he/she can look for a Minnesota property that appears to be in rougher condition than it actually is, in order to get a good price. They can hunt for owners who are facing foreclosure in the hope that they finds someone who is hoping to put his/her property out of their mind so that they can just be rid of it.
There are lots of possibilities. The question is, which property is the right property for you?
Ultimately, the best investment property is the one that will make the most money while costing the least amount to be rented out. Getting a property up to speed might involve renovation to bring a building up to code – adding up-to-date appliances and such. It may involve a fresh coat of paint, or even evicting some undesirable tenants. What the potential new owner has to determine is, if the building's problems are fixable.
For instance, in his book Ken McElroy in his book “The ABCs of Investing,” writes about an investor who had bought a building without even viewing the site, and found himself saddled with some tenants who who were bad and dangerous The investment property was in a bad part of the city where the owner should never have bought a property. By the time he got around to contracting McElroy's property management company, he had already lost a bunch of potential rental income due to delinquency.
McElroy's team repaired as much as they could. Got rid of the undesirable tenants and hired security for the building, but they could do nothing about the quality of the surrounding neighborhood. The property would never be one that renters with a lot of choices would want to live it, simply based on its location. This property would never get the rent that it could have if it had simply been situated in another area. Most of the building's issues were just unfixable.
The old saying, “Location, location, location” is important for a reason. A property’s Location might be the single most important factor the MN real estate investor should consider when searching for potential properties to invest in.
Besides simple viability, an investor needs to think about how he/she wants to go about handling his/her investments. McElroy advises investors to contract a property management firm for the expertise and to free the real estate investor to seek out additional investments, but some investors just like managing their property by themselves. That type of person might want to consider purchasing property that is little enough for him/her to take care of on his/her own. Some investors are unwilling working with partners or investors and will be restricted by that too. When this is the case, less expensive and smaller is probably the best option for them.
In the end, Mr. McElroy also recommends the investor not assume that he/she should begin with a tiny property. If he/she has learned enough to buy investment property in the first place, he/she can learn how to use other people's money. He/she should remember, however, what they are comfortable doing - or what they would consider the most favorable approach. The opportunities are, after all, almost infinite.