5 Questions To Ask Before You Buy Investment Property
By: Ravok Corp | Posted: 26th July 2007
Deciding to invest in real estate is one of the best decisions you will ever make for yourself. However, it isn't something you can decide to do one day and then rush out and do the next. There is a process that you have to learn and lots of information to digest. If you think you have done that already and you are now prepared to go out and make your first purchase, here are 5 questions to help prepare yourself.
What type of investment property are you interested in? Are you interested in a duplex, multi-unit complex, or perhaps just a single family home? Are you interested in commercial real estate? What about raw land? How you answer this question will determine other things that you do later, such as how you decide to actually pay for the property. It is also best to choose one direction to pursue so you don't go on wild goose chases and so your team knows what they should be helping you with.
Do you have a specific area that you are interested in? Are you going to invest in the city where you live? If not, what part of the nation do you want to invest in? The Internet is the best tool for determining what area of the country you would like to put your time and resources into. Ken McElroy, author of “The ABCs of Real Estate Investing,” calls this Level I research. Later, when you have determined a part of the country and a city in which to look, you will need to decide what neighborhood interests you. You will discover that during McElroy's Level II and Level III research.
Do I have a financing strategy? The type of investment property you are looking for (as well as your existing equity) will help to decide how you can make your purchase. If it is a smaller investment such as a house, you may want to pay for it outright. However, even if you don't have the finanacing in place, if it is a piece of property that has generated cash flow in the past, the bank will probably give you a loan. They know that they will get a ROI regardless of what happens to your investment. If you are looking at a larger piece of land that you can't afford outright, you will probably be able to get partners or other investors to contribute.
Is my team in place? It's just too hard to be successful at this without a good team. This is simply because there is so much work, and so many disciplines of knowledge involved, that you simply can't do it all by yourself. You won't have enough time to become skilled at real estate law and accounting, plus broker your own deals and manage your own properties. You have to delegate. That is why McElroy says you start with an attorney, an accountant, a broker and a property manager. After that, you may also need appraisers, tax consultants, a surveyor, a structural engineer, an architect, an estate planner and more.
What is your repair budget? This is very important. Knowing this will help you choose the areas of town to look around in because some areas may be full of old buildings or some newer buildings may actually be in need of a lot of upgrades. You will have to know what you are getting into and whether you can handle it.
This is by no means a complete list of questions. Once you start your investment property adventure, you will discover a consitent list that you will need to pay attention to. But these will get you going on the path to asking yourself the best questions. Sometimes asking the right questions is more effective than the answers themselves.
About the Author: Minnesota Investment Property specialist Alexandria Anderson helps Minnesota Real
Estate Investors to Build Wealth and Prepare For Retirement by investing in real estate. Visit her website at http://minnesota.greatinvestmentproperty.com
for more information.
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Tags: decisions, choose one, neighborhood, cash flow, single family, investment property, real estate investing, chases, raw land, abcs, commercial real estate