Many real estate investors have a specific mentality for what they look at in a potential property. For some, they want the ugliest house in the best neighborhood because they have the fix-it-and-flip-it view. Others want a property they can turn over right away and start leasing to tenants. However, both of these views can lead to problems if you pick the wrong property.
Look at the Big Picture
To continue making money with real estate, you want to know your goals and stick with the plan to reach them. Most investors want to sell a property quickly so they can move on to the next investment. You don’t want a property that will take months to see a return.
It’s easy to get bogged down by the details in a property. Instead, you must keep your goal in mind when you look at each one. Ask yourself some important questions:
- How much profit can I make? Be reasonable about the figure you come up with.
- What strategy will you use to get this property and how quickly can you sell it?
- What exit strategy would you be able to use if things go south?
When you use the same formula for finding a good deal regardless of the details, you’re more likely to be a successful investor.
Don’t Overlook the Details
So, now you’ve looked at the big picture of a property. You know you don’t want to look at ugly houses but rather ones that can be turned over quickly. Next, you must pay attention to the details of the property and situation to know if you can cash in.
Look carefully at the value of the house in its current state. Don’t start dreaming about what you can do to increase the value or make it worth more to buyers. That’s the fix-and-flip mentality, and it’s not recommended to most investors.
Next, focus on how much you can get out of the property versus the monthly payments. You need to be able to make a profit. Know how much buyers in that area looking at that kind of house will be able to afford. Can you realistically sell the property for what you need?
Analyzing a property is essential, but you must also examine the area market to know if your good deal is a great one. Realize that some deals that look good on the surface could be a risk, while others that may not seem so great could turn out to be real winners.
Before you look at investment properties, learn how to analyze them and what strategies to use to acquire them. This education will save you a lot of heartache in the long run.