When purchasing an investment property, asking the right questions to your realtor is crucial to make an informed decision. As an inexperienced real estate investor, you may not be aware of all the factors that can impact your return on investment. To gain insights into issues like location appeal, tenant demand, cash flow potential, and property condition, preparation with 10 key questions is essential before meeting with an agent. Asking these important questions will help determine if a prospective investment property can generate solid income over the long term.
Ask about location appeal and growth potential
One of the most important questions to ask a realtor when assessing an investment property is regarding the location. Factors like school districts, crime rates, employment opportunities and transportation in the area will all affect tenant demand. Also inquire about any major developments planned nearby and whether the neighborhood has been growing in popularity. If the location has strong fundamentals and upside potential, it is more likely to attract residents and appreciate in value over time.
Learn how to estimate cash flow potential
A major motivation for real estate investing is cash flow, so ask your agent to help you estimate this amount for any property you are considering. Things like the purchase price, expected rental income, insurance, taxes, maintenance and other expenses need to be accounted for. Also find out if any utilities or amenities like landscaping are included or if tenants pay for everything separately. The goal is to get a realistic view of how much net cash flow you can expect each month.
Ask about demand and ideal tenants
Understanding the tenant demand and ideal occupant profile for a rental property is key. You want assurance that a property will attract qualified long-term tenants, so ask your realtor who is likely to be interested in renting the property. Factors like price point, layout, amenities and location will determine what types of tenants find the rental appealing. The agent should provide perspective on the potential tenant pool and target demographics like young professionals or families.
Inquire about comparable rentals
Ask your real estate agent to provide rental comps for other similar properties in the area. This market research will help you determine an appropriate asking rent and evaluate how competitive the potential investment property is relative to others nearby. Comparable units should be similar in size, condition, amenities and location. If the asking rent seems too high or low compared to the comps, this is a good indicator of how realistically priced the property is.
Ask about potential downsides or issues
Don’t just focus on the positives when asking questions. Also inquire about any potential downsides or issues that could present challenges if you purchase the investment property. For example, ask about factors like high vacancy rates, nearby development plans, noisy roads, housing regulations or problematic tenants in the area. Identifying possible disadvantages ahead of time allows you to weigh the pros and cons before making an offer.
Asking the right questions when viewing investment properties will help you gain key insights from an experienced real estate agent. Focus your inquiries on factors like location, cash flow, tenant demand, comparable rents and potential issues. Being well-informed on these aspects will ensure you can make a wise investment decision.