Selecting an Investment Property

When a person is trying to make a real estate investment there are hundreds of questions he or she can ask, all of which tend to make investment selection difficult and confusing.  Most confusion arises from choices – choice between a wide variety of properties in a wide variety of areas.  We have always felt that you should invest in an area that you know well and within an easy drive from where you live.  This is especially true for us living the Bay Area because where we live has traditionally been one of the best areas in the country for investing. 

We are very fortunate to live in the Bay Area.

First, one ought to discount the idea of finding a bargain that does not exist.  In a strong real estate market like ours, any worthwhile property will sell at its market value.  Trying to find a property at less than the market value should be of secondary importance.  Any worthwhile property will appreciate over time. Time, not timing, is the important factor.  The length of time that the process of capital appreciation will  work for you depends on your age. So, getting started as soon as possible is very important.

It is true that some properties are in less demand than others at different times. 

However, for the average investor we feel that the most important thing to do is to simply find a worthwhile property that you are able to purchase now.

In the last year, we have seen a 20 plus percentage increase in real estate prices.  Most forecasters are predicting 5-6 percent appreciation for 2016-2017 on the Peninsula.   The rental market is also very tight.  There are more people looking for rentals than there are places available.  Rent prices have increased 20-30% or more in some locations.  As rents rise more investors are looking for rental property to purchase.

Over the years we have heard every excuse in the world for why a person has not invested in real estate: “The prices are too high.”, “Interest rates are too high.”, or “The property is really old and needs a lot of repairs.” Often, the best properties to purchase are the ones that need improvements made on them.  

The excuse that really surprises us is “ Realtors get all the good ones.”  This could not be further from the truth.  Most Realtors do not own a significant amount of real estate.  Only a very small percentage of Realtors own investment property themselves, and those that do cannot buy all of it.  The general public has great opportunities in the Bay Area.

Probably one of the most difficult and important challenges a investor has is to find a good Realtor that truly understands real estate investing firsthand to help them make the right decisions.  Most Realtors list and sell homes.  Fewer Realtors specialize in residential income or rental property.  If you are considering investing in income property you should be working with someone who truly understands rental property.

The most important decision a person has to make is that they are going to go ahead with a purchase; the sooner the better. 

Interest rates are extremely low now and putting off a real estate acquisition is your biggest mistake, in our opinion.  Getting the exact “right” property, if it exists, is not as important as just getting a property.  Get started today. 

This article was published in the San Francisco Examiner.

Articles are written by Eric Ruxton and Larry Aikins, owners of Terrace Realty, Inc. and Terrace Associates, Inc. in Redwood City. Terrace has been in business more than 55 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.