Investing in real estate in Kansas City can provide a lucrative source of additional income for you and your family. However, it’s important to carefully evaluate investment opportunities using proven methods. To help you make informed decisions, we’ve compiled a set of rules for buying investment property in Kansas City!
Location
While it may sound repetitive, the location of a property plays a crucial role in real estate investment. You have the power to renovate and modify almost everything about a home, except for its physical location. It is imperative to invest in a neighborhood that is desirable to potential residents. Even if you have a fantastic house, it won’t generate the profits you desire if it is situated in a less-than-ideal area. So, what should you look for when considering a location for your investment?
- 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.
Understand Your Metrics
When it comes to determining if a property is a good investment, different investors rely on different equations. One such equation is the “Cap Rate.” Simply put, the Cap Rate is calculated by dividing the net income by the cost of the asset. Let’s say you purchase a house for $150,000 and rent it out for $1,000 per month, with approximately $200 in monthly expenses. This would result in a net monthly income of around $800, or $9,600 per year. To calculate the Cap Rate, you would divide the net income of $9,600 by the purchase price of $150,000. In this example, the Cap Rate would be 0.064, or 6.4 percent return on your investment. It’s important to have specific goals in mind, and if the property isn’t meeting them, it may be wise to consider a different house!
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.
Avoid Overextending Yourself
Flipping homes may seem like a fun and exciting venture, especially with its portrayal on TV. However, owning a successful investment property involves much more than just the thrill. If you lack experience in rehabbing homes, it’s crucial not to purchase a property that requires extensive repairs. Before making a purchase, it’s advisable to have a thorough inspection done to uncover any hidden damage. Nothing is more frustrating than fixing one issue only to discover multiple underlying problems. To ensure the success of your investments, it’s beneficial to work and collaborate with a team of like-minded individuals. For novice investors, partnering with industry professionals can greatly contribute to your growth and success!
Looking to Invest in Real Estate in Kansas City? We’ve Got You Covered!
Are you in the market to buy investment property in Kansas City? Look no further! At Faithful Home Buyers KC LLC, we are here to assist you in finding the perfect investment property that meets your needs and goals.
With our extensive knowledge of the local real estate market in Kansas City, we can provide you with valuable insights and guidance to make informed investment decisions. Whether you’re interested in residential or commercial properties, fixer-uppers or turnkey investments, we have a wide selection of properties available for you to consider.
Our team of experienced real estate professionals is dedicated to helping investors like you succeed. We understand the unique challenges and opportunities that come with investing in real estate, and we are here to support you every step of the way.
Don’t miss out on the opportunity to grow your wealth through real estate. Take the first step towards building your investment portfolio by reaching out to us today. You can send us a message through our website or give us a call at 816-237-0869 . Let us help you find the perfect investment property in Kansas City!