When you’re shopping for an investment property, it’s important to ask the right questions. There are some issues that you may not necessarily discover during routine due diligence. Asking these questions (and avoiding these mistakes) will go a long way toward ensuring your investment’s profitability.
Will My New Place Be Noisy?
That property you fell in love with is a few blocks from the highway. The noise level wasn’t bad when you looked at the house on a Saturday, but what about during rush hour? If you’re considering a property, it’s in your best interests to visit during rush hour to check out the noise level. Also, if you’re going to hold this property for the long run, remember that a busy street will probably get busier over the years. For cities that have a subway system, it’s good to look at a map to make sure that you won’t have trains rumbling underneath the floorboards. Even if you won’t be living there personally, if a property is noisy, you’ll probably experience high tenant turnover.
What’s My Flood or Fire Risk?
The risk of a natural disaster could have been minimal when a property was built decades ago, but that can change a lot over the years. Our climate is changing quickly, so the area could be more prone to fires or flooding today. In addition to the risk of property damage, extreme weather can increase your insurance and utility costs. One excellent resource for buyers is the website ClimateCheck.com, which will rate the environmental risks of a given property.
Will My View Change?
One of the features that make people fall in love with a property is the view. That’s why it’s so important to research the plans for a neighborhood. That view of the park could easily be replaced by an active construction site. You’ll definitely want to ask your real estate agent if they’re aware of any plans for the area and you should also check with city hall for any upcoming zoning changes or construction plans.
What Do I Get For My HOA Fees?
Homeowners Associations can make or break the desirability of a property. When you’re looking at a property, find out exactly what your homeownership fees will cover. Some HOA fees cover residents’ water and sewer bills. Beyond that, you should assess the financial wellness of your HOA. The HOA is required to provide financial records to prospective buyers showing how much money they have in their reserves. You’ll want to avoid properties where the HOA doesn’t have enough money to cover an emergency repair. That will inevitably lead to a special assessment, which means that the HOA can simply bill the residents for the project. If your HOA isn’t solvent, you could get a surprise bill for hundreds of dollars if not more.
Can I Rent My Home To Tenants?
This is, bar none, the most important question to ask. If you plan on renting you home to long-term tenants or use it as an Airbnb, you definitely don’t want to discover after the fact that your HOA has a restriction against renting your property. This is also something you need to find out even if you’re buying in a neighborhood of single-family homes. Some neighborhoods have zoning restrictions that only permit owner-occupied dwellings.
Conclusion
The last thing you want is an unwelcome surprise after you close on a property. While rental properties can be an excellent long-term revenue source, not getting all of the information at the outset can adversely impact your cashflow. Make sure that you’re purchasing your investment property with all the necessary facts.
