Albuquerque is ripe with investment opportunities. With Albuquerque’s rising rental costs and low housing prices, it’s undoubtedly a great market for investors looking to purchase an investment property.
That being said, purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are solid investments.
Here are 10 proven tips for purchasing an investment property in Albuquerque.
1. Choose the right location.
The three most important factors when buying a home are location, location, and location. Location creates desirability. Desirability brings demand. Demand raises the price of Albuquerque real estate.
Factors that make for a good income property location include:
- Expected high appreciation in the future
- High rental income. That is, high, positive cash flow
- Relatively low running costs for owning and managing an investment property
- Reasonable real estate prices
- Access to shopping and entertainment options
- Proximity to amenities and public services
- High demand for rental properties
- Low supply of income properties
Neighborhoods in Albuquerque that fit most of the criteria mentioned include: Stardust Skies Park, Bear Canyon, Four Hills Village, Tanoan, Altura, Vista Del Mundo, and Mirabella.
2. Investigate the crime rate.
When looking for an investment property, crime rates are an important indicator to analyze. A high crime area generally reduces the value of properties. For instance, a reduction of homicides by 10% resulted in a 0.83% improvement in home prices in a year, according to a study from the Center for American Progress.
You can learn a lot about a suburb by conducting some online research. You can begin your search by checking crime mapping websites such as MyLocalCrime.com, CrimeReports.com, CommunityCrimeMap.com, CrimeMapping.com, and SpotCrime.com.
Additionally, you could decide to drive around a neighborhood. Signs of a potentially high crime area include:
- Lots of graffiti
- Trash on the streets
- Bars on windows or doors
- Cages around A/C condensers
- Many burnt or seriously dilapidated buildings
- Vacant, boarded-up buildings
3. Consider hiring an Albuquerque property manager.
An Albuquerque property manager understands their locality much better. They can give advice and help you purchase the right property. Besides giving you advice on the best investment property to buy, a property manager will also help you find the right tenants.
They’ll also advise you on the local Albuquerque property law, as well as your rights and responsibilities as a landlord.
4. Invest in a low-cost home.
The less expensive the investment property is, the lower your ongoing expenses will be. Roughly a $150,000 property is what some experts recommend starting with.
5. Determine your return.
Determine your return for every dollar you invest. Bonds may pay 4.5% while stocks may offer a 7.5% cash-on-cash return. For an investment property, 6% return in your first year as a landlord is considered perfect.
6. Calculate operating expenses.
Use the 50% rule. If the rent you intend to charge is $1,500 per month, expect to pay $750 in total expenses. Rental property operating expenses include:
- Maintenance and repairs.
- Property management – If you hire professional management, you can deduct the cost in the year paid.
- Trash collection – This is usually a monthly municipal charge.
- Utilities – These include water and sewer costs.
- Property insurance – It’s deductible as an operating expense every year.
- Marketing and advertising.
7. Beware of higher interest rates.
High-interest rates can eat into your monthly profits too significantly. Thus, make sure the mortgage payments are reasonable. Generally, the interest rate on an investment property is higher than the traditional mortgage interest rate.
8. Understand the market dynamics in the area you are buying.
Talk to as many locals and real estate agents as you can. For example, find out what changes may be happening in your Albuquerque suburb and local council. Access independent information from a source such as RP Data for information such as suburb reports, demographics, property values, and average rents.
You could also browse through real estate advertisements, home magazines, and ABQ MLS property search sites.
9. Determine your cash flow.
In any property investment, cash flow is gold. A good cash flow means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt.
10. Make the property attractive to tenants.
Once you’ve purchased your Albuquerque investment property, it’s time to ensure you get qualified, long-term tenants. For every day you’ll have a vacancy at your rental property, you will be losing potential rental income. Consider the following tweaks to the property to make it attractive to tenants:
Emphasize the positives of your property. Go for a neutral theme. Neutral themes appeal to a broader audience. Refresh the look of your property with paint. Improve your property’s curb appeal. Improve the look of the kitchen and bathroom.
Purchasing an investment property is a significant financial decision not to be taken lightly. Hopefully with these 10 proven tips, purchasing an investment property in Albuquerque will be stress-free and risk-free for you.