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How to Find the Most Profitable Investment Property on the Market

15 Dec 2015 · by Chad Graham

When you are looking to invest in commercial real estate in Anchorage, Alaska or anywhere else, there are many important considerations to keep in mind throughout your search. In addition to working with an experienced commercial and investment property specialist, you will also need to consider your own requirements for the property as a part of your purchase plans.

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Buy If the Price Is Right

Before you get your heart set on a particular plot of land as an investment property, set a budget for yourself. Going over your predetermined budget could make it more difficult for you to exit the property when you need to do so. You may also find that going over budget incurs additional costs over your period of ownership, such as increased property taxes, particularly in Anchorage, AK. Knowing your budget and sticking to it helps to ensure that you will be satisfied with your purchase.

Determine Selection Criteria

Just as prospective home buyers create a list of priorities in the home that they want to buy, you should do this for an investment property as well. Once you have determined a budget, then setting your selection criteria is an important next step. Some aspects of your selection criteria could include the appreciation potential, neighborhood, property condition, property size and lot size, number of units, whether the property can be subdivided, cap rate and your cash flow. You might also consider access to utilities and roads if the property is undeveloped. Prioritize which of your criteria are the most important.

Follow the Real Estate Investment Rules

Just like with personal finance, there are rules of thumb when it comes to purchasing and renting out a piece of investment property. Experienced real estate managers suggest the 2 percent rule. This rule states that the monthly rent should be about 2 percent of the purchase price. Look into what the current tenants are paying. If it is feasible to get close to the 2 percent rule, then this may be an ideal investment property. If the rent collected is close to 2 percent, consider whether you can make any improvements to increase the rent.

Sources:

Chapter 5: How to Find Investment Properties, Bigger Pockets

How To Buy … Investment Real Estate, Market Watch

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