Property investment can be an easy concept to understand—buying a property at one price, and either selling it at a higher price later or using it to generate rental revenue. But for first-time investors, it might require a little more studying to get started. Luckily, there are lots of tools and resources at your fingertips to guide you through the process.
Where should I begin learning more about property investment?
There are a few things you should start thinking about right away and some things to include in your due diligence research, along with a few links to resources you might find useful in your investment journey.
This information is generally listed on a property’s website page, and we highly encourage you to comb through all the details before registering and participating in an auction.
Price and tax history
Look at the last few years of property taxes to get a clear picture of the average amount you’ll likely pay in taxes.
Learn about the population size, median age and income of residents, unemployment rates, and general weather conditions in the area where you are looking to buy.
Find out the median market price for similar homes in the neighborhoods where properties you are looking at are located.
School and neighborhood activity
Check out the public and private schools in the area, as well as the neighborhood walk score and how long it might take to commute to popular work areas or the city center.
Gross yield vs. cap rates
The gross yield is your profit before any expenses you pay on a property and the cap rate (or capitalization rate) is your profit after any expenses you pay to make changes to the property. The gross yield is the annual income generated by an asset and divided by its sales price. It does not take any expenses into account. The cap rate is variable, utilizing the current market value of the property, and looking at the net operating income after expenses.
To uncover any issues or problems with the existing title of a property, consider conducting a title search ahead of bidding on a property. To conduct a title search, start by contacting the Titles and Records department in the county where the property is located or hire a title agent to conduct a search. Generally, this information can be found at a county courthouse, either in their paper files or on their website.
Learning how to be a property investor takes time, effort, and patience, but the payoff can be so worthwhile!
The most important part of becoming an investor is to learn as much as you can about a property you are interested in before bidding on it. If you feel like you’ve done all the research you can, then you’re ready to register for your first auction event!
Still have questions?
Check out the other articles in our Learning Center for a deeper dive into the auction process, property types, and more.