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5 Things to Consider When Shopping for an Investment Property

By U.S. News & World Report

Real estate investments can be challenging, but also very rewarding. Passive income, stability, return on investment, tax benefits, appreciation — the financial advantages of hold-to-rent real estate can’t be denied. Understanding what type of investment property you’re looking for and who your target renters will be is essential in delivering a desirable product to the rental market.

Focus on these five critical criteria when shopping for an investment property to ensure your money works for you.

1. Desirable location. Location, location, location. In real estate, that timeless phrase holds true. Your property’s location will ultimately determine the overall success of your investment, affecting the amount of rent you can charge, the types of renters applying and your vacancy rate. Offering a rental surrounded by attractive amenities, shopping, convenient traffic routes, parks, entertainment and more will draw a steady stream of prospective tenants.

Before purchasing, research the local school ratings, job market, shifts in the rental market, design trends, local crime rates and any city codes that could potentially affect your property. The more desirable your location, the lower the risk becomes.

[Read: The 5 Biggest Mistakes Real Estate Investors Make and How to Avoid Them.]

2. The numbers. Underwriting is a critical element of deciding which investment property to purchase. Allowing emotion to drive your decision making when searching is a detrimental mistake. Separate yourself from your likes and dislikes and focus on what the market is demanding in a rental. Positive cash flow is the end goal, as this is a source of income for you, not the home you’re planning to live in.

Constructing a financial plan and budget prior to purchasing is key as you’ll be covering not only the mortgage, but also taxes, maintenance, design costs, improvements and unforeseen complications. Accounting for overhead and average vacancy rates is something to be factored in when underwriting a potential purchase. Calculating what your true profit will be against your initial investment is what matters.

3. Low overhead. One key way to ensure you maximize your return is to choose an investment property that won’t require much maintenance and overhead. Commonly, longer-term rentals are lower maintenance than, say, vacation or student rentals. Steady long-term tenants will yield the best returns on your investment.

Often the less flashy, more median-priced rentals yield the steadiest returns year-over-year as compared to high-end, luxury rentals that require more maintenance. Also, consider whether you’ll be hiring a property manager or if you’ll be doing any maintenance yourself. Proximity to your income property will be important if you’re handling this aspect on your own.

[Read: Opportunity Knocks: 6 Indicators to Find Top Real Estate Investment Markets.]

4. Appreciation. The smartest investment is one that appreciates in value. As an investor, appreciation is two-fold: When you buy the property and when you sell it. The best approach is to find a property where only a few cosmetic updates will allow you to charge more per month and won’t cost you a lot. You will also save on your initial investment rather than hiring contractors to do the work, like a fresh coat of paint.

Generally, most land is going to appreciate a little over time, but you want an investment that increases in value more than the rest. Try and find an up-and-coming or already desirable area that has plans for future development. On the flipside, a neighborhood that’s safe and quiet for families could be just as desirable.

Consider the specific location of the property within its community. Is it on a busy thoroughfare or on a private cul de sac? Close to great local schools or in a high-density urban environment? These are all things that will help you forecast your property’s appreciation over time.

5. Practical wins the race. Of course you want your income property to be aesthetically appealing, but there’s a smart way to approach this aspect. A long-term rental is a strong, stable investment, but only when not trying to reinvent the wheel. Low risk equals “normal.” You don’t want to limit your audience of potential tenants by purchasing a highly specific property such as a historical Tudor-style home with unique interior features. You should be aiming for bright, open, clean and tasteful.

The more specific the rental is, the higher the risk your investment becomes. A practical rental property will ensure a steady flow of tenants, like a two-bedroom traditional house with 2 1/2 baths in good shape, close to shopping centers, local schools, nearby parks and on a quiet street. Or a more modern one-bed, one-bath in downtown with open layout and building amenities such as a gym and pool for a younger crowd. Educate yourself on the market where you’ll be investing, and choose a property that meets the demand and is appealing to a wide audience.

[See: 8 Home-Selling Buzzwords That Annoy Consumers.]

When investing in long-term rental real estate, the party line is simple: Stick to the fundamentals. While you may not be offering the most architecturally exciting property on the beach, you will achieve steady returns and a worthwhile return on your investment.

More from U.S. News

Buying or Selling Your Home? Think Like a Real Estate Investor

Bubble Talk: 4 Things Every Investor Needs to Know About the Housing Market

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5 Things to Consider When Shopping for an Investment Property originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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