How to Determine Which Type of Investment Property is Right for You?

If you’ve got some spare capital and you aren’t sure what to do with it, investing in property is nearly always a good idea. But, if you’ve never considered buying a property for investment, the concept can seem daunting and overwhelming. When it’s your hard-earned money on the line, you need to be sure to choose the right type of investment property. Here’s what you need to know about the benefits of investing in property and how to pick the perfect property to achieve your investment goals.
 

Benefits of investing in property

Many people avoid real estate investments because they are anxious about the size of their investment or because they are concerned about the risks. However, there are many reasons why countless people choose to use their additional capital in this way. Here are some of the top benefits of investing in property.

You can leverage your investment. This means that you can invest just a small percentage of the value of the asset, in this case, a mortgage deposit, and then pay the rest of the cost of the property down. This means that you’ll both make rental income, pay the mortgage down and enjoy any natural appreciation in the value of the property.

Tax benefits. One of the main reasons why many people invest in real estate is because of the tax benefits they can enjoy. Some of these include writing off:

 

• Mortgage interest paid on the loan
   

• Origination points paid on the loan
   

• Maintenance expenses
   

• Depreciation
   

• Real estate taxed, homeowner insurance, and HOA obligations

Regular cash flow. Keep your bank account in the black by receiving a monthly rental income on your property.

How to choose the right investment property

Before you start looking at different properties for investment, there are three key things to consider. Firstly, how much you have to invest. This may limit your options. Secondly, whether you are looking to buy a property outright or whether a better financial decision would be to make a down payment and take out a mortgage on a property. And finally, what type of tenants you would like to have.


 

Single-family homes

Single-family homes are a very popular choice, especially for first-time property investors. In most cases, you’ll be able to attract a long-term tenant who will provide a stable monthly return on your investment, while your property also increases in value. The good news is that tenants are generally willing to pay more per square foot for a single-family home because they have the benefit of private space, a backyard, and more.


However, it’s also worth noting that if you invest in a single-family home, you will also only have a single source of rental income. So, it’s important to take into account any potential loss during times of tenant turnover or in case of unreliability in them making payments.


 

Multi-unit homes

Alternatively, you may choose to invest in a 2, 3, or even 4-unit home, and from a financial point of view, these tend to provide the best option in terms of cash flow. That’s because you’ll have multiple tenants and so will receive multiple revenue streams every month. And if you experience a lapse in occupancy or some major repair bills for one property, you’ll still have money coming in from the other occupied properties.


While the numbers stack up, you should also be aware that generally, tenants of multi-unit homes don’t stay as long, and they aren’t as prepared to pay as much per square foot as tenants of single-family homes.


 

Apartments

Apartments mean you will be able to multiply your revenue streams, and this will boost your monthly cash flow. However, apartments are usually harder to purchase as they require significantly more money upfront, meaning you’ll need a good lump sum to invest to make this a viable option. You’ll also be liable for more overhead costs, and maintenance for shared areas and may even be faced with disputes if your tenants in neighboring properties don’t get on!

 

Condo

Just like a single-family dwelling, a condo is a good choice for a single revenue stream. Condos tend to go up in value slowly, but offer a great return on your investment. This is particularly true because condos come with an HOA which covers things like yard maintenance and exterior repairs, meaning that there is less in the way of maintenance costs for you as an investor.



If you aren’t sure which type of investment property is right for you, speak to our friendly and dedicated team at Prime Property Group. Call our office in Oakland or Sacramento, California at (510) 225-0470 or (916) 822-9655.

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