Owning real estate for investment purposes is a challenging experience. If you do your due diligence properly, you can create a separator that not only gives you a greater chance of profitability, but gives you a sense of fulfillment and accomplishment. It can be an empowering experience. I have identified ten key elements to review prior to making an offer on any real estate investment. These are geared mainly for residential rentals, but still are important when considering a commercial real estate investment.
*Look at the neighborhood. The quality of the neighborhood you choose to invest in will not only influence the type of tenant, but may have a direct effect on how often you have to deal with vacancies.
*Property taxes; Investor be ware…property taxes are not standard in nature and vary from area to area. When you are planning your projected budget, know the property tax rate for the area(s) you are considering.
*Put yourself into the mindset of tenants. What is important to them? Think in terms of school quality, close proximity of supermarkets…What about local churches, gyms, parks, public transportation, and entertainment?
*No one wants to live in an area filled with crime, so do some research with the local police department. Find out what areas of the city have a lower incidence of crime.
*Look for regions areas where there are jobs and where there is a potential for job growth.
*Research local building department(s). Find out where most of the growth is centered. Find out how many building permits have been issued. A word of caution…watch out for an excessive glut of multi-family housing either available or under construction. This could lead to a decrease in value depending on market shifts.
*Get with a real estate agent who is experienced in the rental market. Find out the total amount of listings and vacancies. Find out what types of properties have a higher incidence of vacancy. Develop a system for analyzing rental rates within the markets.
*Know your risk tolerances…ask yourself some tough questions. What if my property remains vacant for 6 months or more? Does this area have many natural disasters? What if there is a down-turn in the market…do I have the means to wait it out?
There is a lot work to owning real estate investment property. Every area has good and bad elements. Keep your mind on an even, unemotional level when approaching real estate investing. It can be a challenging task. It can be a rewarding experience. Doing your due diligence prior to purchasing real estate can not only be empowering, it can save you from a potential financial disaster.
