Figuring out whether an investment property is a safe bet isn’t always an easy task. It takes a certain level-headedness and know-how to get it right. 

If you’re new to real estate, this post can help. We look at some of the techniques you can use to get ahead and succeed. 

It Has Cash Flow Potential

First, you’ll want to note the cash flow potential of the property. If it’s ready to start generating income immediately after considering mortgage and expenses, it’s a sign that it’s a safe investment. 

What you don’t want is a property that requires a lot of work and is also going to drain your cash. Usually, that will result in you losing money. 

It Is In Good Condition

You’ll also want to check if the property is in good condition. The better appointed it is, the more money you’re likely to make from it, especially in the long term. 

Using house inspectors is essential in these circumstances. You need to know for sure that there are no latent problems that might come back to bite you later. 

Remember, many sellers try to dispose of properties because they know they have hidden issues. You don’t want to be someone who takes on a project like this only to discover your cash flow and profitability are far lower than you’d hoped. 

It Falls In Line With Market Trends

You can also look at market trends to determine whether an investment property is worth your time. The best properties are those that start off at a low price in an area with rising property values. If you can find one of these, you’re off to an excellent start, as you’ll always benefit from the appreciating value. 

It Offers Economic Stability

You also want to buy properties in areas with economic stability. There’s no point in trying to buy high-yield properties that will appreciate in areas where the economy is struggling or where people can’t find high-paying jobs. These regions often fail to keep pace, thereby lowering your returns. 

For example, imagine if you’d invested in property in San Francisco during the 1990s compared to, say, Detroit. The differences would have been stark. 

It Meets Legal And Zoning Checks

You’ll also want to ensure the property meets legal and zoning checks. You should be able to use it for the purposes you want (usually private rentals), and it shouldn’t have any liens against it from previous owners. If it does, it could indicate a serious issue. 

It Has A Favorable Cap Rate Comparison

Finally, you should check the cap rate against similar properties. You can calculate this figure from dividing the net operating income by the property price. 

This simple figure tells you how it compares to other properties nearby. If the figure is higher, then you should go ahead with the purchase, but if it’s lower, you shouldn’t. You want to ensure that you’re getting a good deal compared to other properties in the area offering similar facilities and locations.