Buying investment property in Fort Wayne is a great way to make additional income for you and your family. Different investors use different calculation methods to determine if an investment is right for them. Before you make any large investments, take into consideration our rules for buying investment property!
Location, Location, Location
The very first rule in buying investment property in Fort Wayne is also probably the most important. Yes, this has been said before, but this is a huge factor when buying investment real estate. You can make the WORST house the most beautiful home. What you can’t change? Where it’s located. You need to find a neighborhood where people want to be. You won’t get the profits you’re looking for if you have a great house in a bad area. So what do you want to see in a location?
- Convenience. Most people will want to get to the grocery store in a reasonable amount of time.
- Low crime. You do not want to have to deal with vandalism, theft or dealing with bad tenants you might find in a high-crime area
- No main roads. Nobody wants to hear traffic noises all day, or have high traffic in front of their home where children might be playing.
- No commercial property nearby. Commercial properties encourage noise, traffic, litter and vandalism.
- Proximity to schools. You will need to find a sweet spot as far as distance. Families will want a quick commute for their kids, however, homes adjacent to a school will often have lower property values. This is due to more traffic and kids loitering in the area.
- Things to do. You can tell it’s a good neighborhood if you see parks, shops and restaurants nearby.
Know Your Numbers
The next rule in buying investment property in Fort Wayne is to know your numbers! There are many different methods and equations to determine if a property is a good investment. One method is to use your “Cap Rate.” The short version: The Cap Rate is your net income divided by the asset cost. So let’s say you buy a house for $150,000. You rent it out for $1000 and incur about $200 a month in expenses. You will net about $800 a month, or $9600 per year. You would then divide $9600 (your net income) by $150,000 (what you paid for the house.) In this example, you would end up with 0.064 or 6.4 percent return on your investment. You should consider a different house if the goals you have in mind are not being met by the particular property you’re interested in.
Another method used by investors in the 1% rule: This rule states that a house you are renting out, should bring in 1% of your purchase price each month. This can change market to market, but it is a great guideline to use when determining the value of a house as an investment.
Some investors use a 50/50 rule to keep them on the right track. This rule states that 50% of the profits will go to expenses other than the mortgage. This includes repairs, taxes, and rental costs.
Don’t Get In Over Your Head
The last rule in buying investment property in Fort Wayne is more common sense than anything. Some people get involved in flipping homes because they have seen it on TV, or think it looks fun. Unfortunately there is so much more to owning a successful investment property than what is shown on HGTV. Don’t purchase a home that needs a ton of repairs if you are not familiar with rehabbing a home. You will want to have an inspection done to ensure there isn’t damage lurking behind the walls. There is nothing worse than going to repair one thing and being met with 10 more things you found under the surface. Working and partnering with a like-minded team will help your investments thrive. If you are a novice investor, working with other people in the industry will help you to grow!