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Key Things To Consider When Purchasing Investment Property

Apr 14, 2008
When considering purchasing investment property, whether it be for residential or commercial purposes, it is essential that the investor looks carefully at more than the price on the property. The demographics, median income and shopping habits of the people in a given area are crucial to the investor being able to rent out the property for a descent price, to a good tenant, and on a long term basis, with minimal voids.

Any individual or company purchasing investment property may have many reasons for doing so. They may want to rent out a home for profit, rent out a retail space, start up a new business or move an existing business. In every one of these situations, the local demographics will play a large role in the success of the endeavor.

The demographics of a given area are broken into several key aspects. These aspects include:

Median Income: If the median income of the area is lower than the national average, the people of the area may not flock to a high end retail space. This also plays a roll if you are looking at tenanting residential properties. The lower the median income, the lower the rent you will be able to charge for a home. Thankfully, this also means that the price of actually purchasing the home is usually less as well, but this is not a guarantee and the correct due diligence and research, on the part of the investor, is crucial.

Racial Demographics: The racial demographics of a given area are important for investors who want to start or move a business. If the local consumers will not connect with your business offerings or brands, the business will not succeed.

Rent to Ownership Ratio: If the area you are purchasing the investment property within is home to nearly 100% homeowners, a rental home may not be appropriate. It is important to "know your neighbors" before making that big investment jump. On the flip side of the coin, if you are purchasing investment property in an area where nearly 100% are renters, you might be struggling to sell the home if you ever want to. The key thing to ask yourself in both of these situations is why is it nearly 100% renters or home owners? It is only after finding out the answer to this question that you can make a decision as to whether to continue to buy property to rent or flip in that location.

Local Weather: Seemingly unimportant, the local weather and climate seasons will play a large role in several styles of business. If the business will be placed in the desert, for instance, it should work within that climate and within those demographics. A pool supply store - GREAT. An ice melt company - NOT SO GREAT!

When planning on investing in real estate, the investor will need to look at more than the bottom line. Money is the major player in any large purchase, but if the demographics of the area are not what you will need to make the business work, there is little or no reason to step into that debt. The local demographics of any given area can be researched online through many portals. Every aspect of a given area is free knowledge and may help save the investor a few, or a lot, of money in the end.
About the Author
Do you want some more tips on purchasing investment property? Carlton Johnson a well respected author, investor and webmaster, who gives away a free book, software, advice and tips at the following site: http://www.investment-property-guru.com
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