It doesn’t matter if you are thinking of buying investment real estate to augment your investment portfolio or if you are a first time investor getting ready to start a steady stream of lucrative investments. There are several considerations you must make as you consider your options, and failure to have ready answers for them will most likely spell failure for your venture.
The top ten considerations when buying investment real estate are as follows:
1.Do you have a workable business plan? This goes a lot further than simply the three notations of “find property, close deal, repeat” and instead focuses on the various stages of the project and ensures that each step goes through without a hitch.
2.Are you clear about your minimum cash flow? Failure to be accurate to the last penny about the kind of money you are able to spend will cause you to let many a great deal go by as you are working on the merely good ones.
3.Do you know the bottom line return on investment you need to make for your fix and flip properties? While this in large part determines the kind of fixes you will undertake, it will also influence the neighborhoods you will buy into.
4.Do you have a reliable pool of investors ready to go? There is little more heartbreaking than having found a killer deal where you know you cannot lose and then one by one your investors drop out.
5.Are you clear on the steps to take to find the property you are thinking of buying?
6.Did you do your homework with respect to rents currently charted in the area you will be buying into? Did you check on the trends?
7.Are you sure that you will have no problem renting out the property? If you see a lot of “for rent” signs up, this should be a warning sign that the competition for renters is stiff.
8.Remember that buying investment real estate is only one part of the equation; managing it is the other. Do you have a property manager ready to take over as soon as the ink is dry on the deal?
9.Assuming that you are focusing on a certain type of real estate, do you have a set of rules by which you will govern your transactions?
10.Finally, do you have an alternate plan in case any of the pieces of your plan fall through?
While the latter sounds a lot like you are borrowing trouble, the sad reality rests in the fact that many a real estate deal goes sour not for lack of enthusiasm but because a sudden hurdle is not overcome.
It is the savvy investor who not only capitalizes on such deals by snatching them up, but who also as an ace in the hole as needed to protect her- or himself from losing a deal. Having backup options will be of tremendous help if an investor drops out or your prospective property manager no longer is able to meet your needs.