Before you buy your next property, you need to do your research when determining if the property is worth investing in and having an exit strategy in place is the most important. When evaluating a property and determining an exit strategy there are a couple of factors to consider:
1) You need to think using a buyer’s point of view. The person buying is typically thinking of owning this home for a long time. Typically a 3 to 7 year timeframe on average.
2) Is it a hot or cold resale area? You should look at the comparable properties to determine the “solds” and “pendings” versus active listings. Ideally 50 percent of the listings in the area should be pending and sold in the last 3 to 6 months. Meaning if there are 10 listings that come when you do your search there should be a minimum of 5 that have a status of sold or pending. This is a good indicator of the activity in the area, and will give you a good idea of how your property will fare.
3) School district- Obviously the better the rating of the school district, the higher the values are for resale. This is true for rentals of course, but it’s a must for resale. I’m not saying to buy all of your rentals in bad school districts or in neighborhoods that have slow resale value. I’m just stating that these are the largest factors for resale. Real quick, I like to buy my rentals in areas that have decent schools but the neighborhood might be moving slow for one reason or the other. This generally means the demand is less and the supply of homes is higher therefore I can buy them at a cheaper price and create more cash flow. The occupants that don’t have the luxury of buying, but still want to be in the better school districts will pay a premium in rent to be in those school districts. And typically that neighborhood will eventually turn because of the school district and become a good resale neighborhood. The prices will go up and then you will have a great flip with even higher margins then you would normally have.
If you consider these factors before your next investment, you will greatly increase your likelihood of a successful investment. To learn more about investing in real estate wisely, be sure to follow us on Twitter, Facebook, Pinterest, and Google+.