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  • Posted December 20, 2022

How to Make Sure an Investment Property is Financially Viable

Are you thinking of buying an investment property? If so, it is important to make sure that the property is financially viable. There are a few things you need to consider when making this decision. Here are the three most important factors to keep in mind according to our certified financial planners in Hartford, CT.

Analyze the Cap Rate

One of the most important things to consider when investing in property is the potential return on investment. One way to evaluate this is by looking at the capitalization, or "cap” rate. This is a metric used to estimate the income-producing potential of a property by dividing the annual net operating income by the current market value or sale price of the property.

A higher cap rate indicates a more financially viable investment, as it indicates a higher return on investment. Therefore, when considering an investment property, it is important to analyze the cap rate to make sure that it is a financially viable investment. Our certified financial planners provide financial planning services including mortgage planning.

Look at All the Costs

When you're ready to invest in a property, it's important to take a close look at all the costs involved. You need to consider all the expenses, including taxes, HOA fees, and insurance. By taking the time to do your research upfront, you can make sure that you're getting a good deal on your investment.

Additionally, it's important to consult with a qualified real estate agent who can provide insights into the current market conditions. With careful planning and due diligence, you can make sure that your investment property is a wise one. We provide investment planning services in Hartford, CT.

Consider Market Rent

When considering an investment property, it's important to think about more than just the purchase price. Another important factor is the market rent for similar properties in the area. After all, the goal is to generate income from the property, and that income will come from renting it out. By researching market rents, you can get a better sense of how much return you can expect on your investment. You can also use market rent data to negotiate a better purchase price. So before you finalize any investment property deal, be sure to do your homework on market rents. It could make all the difference in your bottom line.

Buying an investment property can be pretty confusing. There are a lot of things to consider beyond the considerations of a personal home purchase. Be sure to think about these three things to make sure an investment property is profitable.

Did you enjoy this article? Here’s more to read: What Every Stock Investor Needs to Know Before Buying Real Estate

Contact Tenpath Financial Group for certified financial planning services.