What types of properties should you be buying?


As you think about becoming a real estate investor, you probably have an idea of the kinds of properties that you want to buy and rent out. Perhaps you picture yourself managing single family homes. And not just any old homes — you want to own luxury properties with amazing design and features.

Or perhaps you’ve heard that apartments are the only way to go. Or office spaces. Or small starter homes.

Before you start purchasing properties, remember that you’re becoming a landlord so that you can earn money. To earn money, you not only need to look at the numbers (will rent cover and surpass expenses?), but you also need to consider your potential market area. Will people be lining up to lease your high-end rental? Or will it sit empty and lose money for you?

To help determine what types of properties you should concentrate on, take time to do some research. You don’t need to hire a company or spend much money — if any. Here are some ways to find out about the rental market in your area:

Learning about demographics — what the population is like in your area — is incredibly important. Is your area growing? Are businesses moving into your area? What’s the income of people seeking leases? Do people stay in the same place long? You can discern information from primary sources like data.census.gov, census.gov, and the Information Please Almanac (www.infoplease.com). Outside of the United States, search for population information from your local government offices.

Pay attention to your local papers. Business and housing sections can tell you a lot about the direction your area is going. Is a large company moving to the area? Are there empty and abandoned retail areas? Are new subdivisions being built? Are investors buying lots and putting up office buildings? Is there a housing shortage, or an over-saturated market?

Finally, the best source of information possible: your local realtor. Realtors know what people want to lease and what they look for. They can tell you if there’s a demand for your high-price luxury home, or if you’d be better off buying a lower-priced home near a school and park. Or perhaps the market is bad, and you should look towards strip malls or office buildings instead. A knowledgeable realtor will save you lots of headaches, and likely lots of money!

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