I try to create articles that will last for a while in terms of relevance, but…
Real estate investors are a special breed. You have to be, in order to take on the responsibility of purchasing, fixing and flipping a property. Many investors also have portfolios that reach into stocks, mutual funds, bonds or other alternatives like crypto. No matter what area interests you, there are fundamentals that should be considered. Here is a quick real estate checklist:
- Location: I could get cute and list “location” 3 times, like everyone else, but we’re saving time here. Look for areas with strong economic growth. Economy has a direct effect on the crime rate. Do a search on the quality of the schools in the area. If you are selling to a family this will be very important. Look at other amenities like grocery stores. Is the property surrounded by fast food? Take a walk around nearby parks. Are they well maintained? Single occupants might be concerned with transportation. All these factors have a direct effect on the property’s potential value.
- Market Conditions: Research the current interest rate. Will it be easy or difficult for buyers to obtain a mortgage? How many homes are currently available in the area? Look at the recent sales in an area, rental rates and vacancies. Are you selling to a family or another investor? Investors will seldom want to pay top dollar. Maybe the play is to just fix what’s necessary and offload the property with some attractive equity left in it.
- Investment Strategy: Be honest. Are you trying to flip the property? If so you need to have it rehabbed in record time, with minimal effort. It helps if you know how to fix up houses yourself. If you aren’t doing it, your contracting team is very important. Are they members of your family? Are they complete strangers? How reliable are they? If you are not flipping then you are renting. If not one of the two, it’s not an investment. It’s a liability.
- Financial Potential: Beyond the price of the initial purchase, there will be fixed costs that need to be accounted for. Mortgages, property taxes, insurance, utilities have to be balanced against sale price or rental income. Please remember the longer you keep any property, the more it costs you. Sometimes there will be a property with current tenants. You will need to verify how much time they have left in their leases. Also ask the seller to verify the payment history.
- Due Diligence: GET A HOME INSPECTION! I put that in all caps, because I was that “investor” who bought a “great property” which ended up not being structurally sound. The City of Chicago sometimes requires an architect to approve the permit. Blueprints are expensive. Pulling permits is expensive. Learn about the neighborhood zoning and check for court-related actions against the property. As the investor you are expected to cover everything for one reason. The upside potential is much greater for you. When you find that perfect place, the final transaction can cure all your financial worries. Until then it’s up to you to pay this small army of mercenaries who also need to be closely monitored. The inspection report will let you know where to begin.
This list is by no means comprehensive. It’s a quick reference based on my personal experiences. Full Disclosure: I am a newly minted broker, but I have had many successful investments dating back to 2005. I also had a couple of EPIC disasters. You’ll never lose if you learn, but hopefully this helps save you some time; maybe reduce your stress levels a bit.