Real Estate Investment Property

The first decision you must make before looking for your real estate investment property is on the type of property you want. There are a number of factors to consider before you make your decision because each differs from the other.

We'll examine in general terms what to look for regardless what type you decide on and then consider five common types of real estate investment property.

What to Look For:
1) General location
2) Site improvements
3) The lease form used
4) The income produced
5) Type of expenses
7) Management requirements
8) Financing
9) Depreciation benefits available
10) Unique features

Types of Investment Real Estate:

1) Apartment Complex - This is the most popular form of real estate investing and can include anything from a duplex to a high-rise building. Apartments can be rented on an annual lease basis or month-to-month. When present, coin-operated laundries and storage facilities or garages can produce a small addition income from the owner. A well-managed apartment complex can be a highly profitable investment and a great way for new investors to get started.
2) Office Buildings - This type of investment property requires more savvy then multifamily property, so first time investors should be cautious. Office buildings are generally leased on a square footage basis rather than a flat price per unit; typically including a cost for a proportionate share of common areas like entrances and hallways
3) Shopping Centers - In many parts of the country this type of real estate investment is very popular, but as with office buildings, contain some unique features of which an individual investor should be cognizant. A shopping center can mean anything from a couple of stores (known as a strip center) to large regional malls.
4) Warehouses and Industrial Buildings - Rental warehouses provide small-to-large bays or rooms used for storage and small workshops. These typically rent on a month-to-month basis and thus (because tenants can move out at anytime) make it one of the least stable of all real estate investments.
5) Mobile Home Parks - This type of real estate investment has become one of the most sought after in recent years because it provides retirement-age people and young couples a reasonably priced home. In this case, a pad with water, sewer and electricity hookups, plus a concrete patio area and tie down rings is rented to someone who wants to place a mobile home there.

Here are 7 important items to consider.

1. Financing, typically lenders will only lend up to 65 percent of the value of the property when it's for investment purposes. This limit is in place because lenders consider an investment property a higher risk.
If you have equity in your current principal residence or in other property, then you may wish to borrow from those sources to maximize your mortgage and financing generally speaking your investment property.

2. Another important consideration for your investment property is choosing the best location. If you are considering a townhouse or a high-rise condo for your investment, then you want to ensure that it is located close to major shopping, transportation and schools and amenities that will appeal to prospective tenants.

3. Generally speaking, a high-rise condominium will allow you the most flexibility and least amount of effort and maintenance during the tenancy compared to any other type of property. Once a high-rise condo is rented, it is nearly a hands free investment.
A freehold townhouse, semi or detached home will require more maintenance and effort on your part and the tenant throughout the year. This may be more desirable or not, depends upon your circumstances. Many investors choose freehold properties for their investment properties as they have the time or prefer to do some of the maintenance themselves or at least have control over the entire property compared to condo type properties.

4. As a continuation of the items considered in number 3, these different properties will appreciate at different rates, all things being equal. This larger appreciation would be offset by the fact that more maintenance may be required by you the owner.

5. It is important to consider all the expenses when you purchase an investment property. The obvious expenses are the principal and interest costs associated with the mortgage or financing on the property, the annual taxes and any monthly maintenance fees if the property is a condominium.

6. Once you have purchased your investment property your other major consideration is finding a good quality tenant. The number one consideration is that you find a tenant who has the ability to pay the rent and if possible can show a good history of paying the rent. The second most important item is to make sure that your tenant will take care of the property for you in your absence.

7. You have to decide to find the tenant yourself or use a real estate agent. You will have to do all the credit and personal investigations of the tenant. I have found that when you use a real estate agent to find a tenant for your property, the qualities of the tenants are usually better than through private means.

Of course, a real estate agent can find you a good quality tenant and perform all of the credit and personal investigations on your behalf. As you can see, there are many important items to consider with an investment property that you are considering to purchase. Your personal situation, financial ability and degree of involvement in your investment property will ultimately determine the type of property that you will purchase.

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