Location
“Location, location, location!” If you have spent any time near a real estate professional, you’ve likely heard this phrase. The intrinsic value of your location should be your main focus when you begin your search. Remember that real estate investments are for the long term, so you’ll want to find the best location possible now to help ensure the value remains high on the property. You’ll want to research data such as crime rates, nearby parks, schools, and other conveniences of the neighborhood. Does the property conform to everything in the immediate surrounding area? It all matters when you are analyzing an investment property.
Inspection
Stop. Do not pass go until you’ve had the property inspected by a professional. The condition of the property and any costs to bring it up to the standard needed to be figured into your data when you’re analyzing an investment property. Depending on many factors, the age of the property not the least of them, factor in a higher level of upkeep. You may want to weigh these expenses over the long term against upgrading structural or system issues, such as plumbing, fixtures, air conditioners, and appliances.
True Cost
When analyzing an investment property, don’t forget to factor in costs that come from owning real estate, that aren’t calculated into the cash flow numbers. Consider how many of the hats, if any, that you’re willing to wear yourself for your investment business. For Instance, will you actively be the landlord? Are you experienced in all fields of home repairs or will you hire maintenance crews or property managers? What about cleaning crews and rehabbing or cleaning units at the end of a lease.
Comps
It is important to understand comps, or the most comparable properties in size and amenities and located in similar areas to the property in question, which are either on the market or have recently sold. These numbers provide you with valuable data in order to properly analyze the price you should expect to pay for a similar investment property. In the same way, you can compare what you can reasonably expect to rent your unit(s) for monthly.
Income
Investing in real estate is a business, as such, it all comes down to the bottom line, what will you gain in income from this investment. The significance of the calculations involved in determining this number can’t be overstated when it is time to begin analyzing the numbers on an investment property. The seller or his agent should provide you with all of the necessary information from their records in order for you to calculate the potential income or cash flow of your investment. The steps involved and formulas used to calculate cash flow are readily available online and in print to those who wish to educate themselves on the process. Likewise, a true professional would be happy to help you through the steps until you feel more comfortable overall with the process.