Buying an investment property is a solid way to increase your financial portfolio. But not all real estate is a good investment for building your nest egg. Knowing the ins and outs of the real estate and sales markets is important, as is the overall condition and location of the property. 

Buying an investment property can be a very large financial outlay, especially if you’re doing it with a personal line of credit.

Here are a few things to consider before signing your name on a real estate document.

Location and Taxes

Location, location, location … it’s not just a buzz phrase. If you’re looking for a house to sell or rent, buy property in a clean residential neighborhood. Check out the school district—nearby schools attract families. Along with homes listed on public resources, check out the pocket listings (off-market sales).

In residential areas, note how many tax levies have passed during the last 15 years. Houses in established residential communities tend to have higher school taxes, especially in affluent neighborhoods. 

Commercial property in business areas or industrial complexes pay taxes too, but in any case,  real estate property taxes vary in Ohio.

Hire a Real Estate Agent

Real estate agents know what to look for: neighborhoods that draw tenants to businesses, schools, nightlife, and nature. For example, in Cincinnati and Northern Kentucky, your agent can run a comparative market analysis to determine neighborhood rents and what the return on investment (ROI) might be.

Play Detective

If you’re buying in a residential community, research the neighborhoods and decide on what you like. Read local newspapers and blogs. Talk to the neighbors to see how they like living there. Cruise the streets in the evenings and at night to see how quiet (or noisy) they are.   

Hire a Lawyer 

Buying property, whether for personal use or as an investment, is a complicated transaction for anyone who’s not an expert in the field. Real estate agents guide you through the processes, but they are not (generally) licensed to practice law—knowing real estate laws is important if you’re planning to rent the property. Consulting a lawyer may seem excessive, but when you’re investing a large sum of money, it may save you money and trouble in the long run. Landlord-tenant laws, zoning ordinances, and disclosure laws are all part of the process.    

Maintenance

Proper maintenance of an investment property is essential. While it’s OK to do a few easy things yourself—like cut the grass and stain the deck—hire a management company to take care of the everyday operations. 

Most property maintenance companies can help with:

• Tenant screening—determine creditworthiness and run background checks.
• Marketing—draw would-be tenants to the property.
• Upkeep—replace light fixtures, clean windows, fix toilets, and more.
• Inspections—check on tenants to be sure they are not violating the lease terms.
• Financials—rent collection, reviewing income and expenses, paying taxes, etc.

Large maintenance projects should always be handled by a professional. Never attempt to fix a furnace or air conditioning unit by yourself unless you are certified in HVAC. Electric panels can be dangerous if you don’t know what you’re doing. 

Furthermore, roofing is complicated, and the many different parts of a roof can be daunting. Plumbing is nothing to fool with unless you want to flood the house. Hiring experts—who are bonded and insured—may cost a few bucks, but in the long run, they’ll protect your investment. 

Fixer-Uppers

Fixing up old houses can be a lot of fun—if that’s your thing. But be careful about taking on more than you can handle. Rehabilitating a property is expensive. Investing in a turnkey property is easier, and you can start looking for a tenant sooner rather than later. Additionally, hire a professional building inspector to point out structural damage.

The property you buy as an investment may be a dream or a nightmare, depending on how well you do your homework. Contact Cincinnati & Northern Kentucky Real Estate to accompany you on this important journey. 

Teri Silver is a journalist and outdoor enthusiast. She and her husband live on 5 acres with a vast lawn, three gardens, a farm, a pond, many trees, and a lot of yard work! The best parts of the year are summer and fall when home-grown veggies are on the dinner table.