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By Roger Dolanch Broker/Owner

There are countless tips and books about real estate investing available and the following is not intended as a comprehensive list. While every investment has its own intricacies and problems that need to be worked out, there are some very basic aspects that are common to most investment properties. Understanding those aspects and asking questions about them can help you determine whether a particular real estate investment is the "right" opportunity is for you.

1. Anything Can Change

Building in the capacity for change in your investment is not only good real estate advice, but good life advice. Aspects of an investment can change at any given time and building in a little cushion in your profit projections for that change will most likely give you a better outlook on the possible outcome of your investment. Keep in mind that solid investments can withstand changes in the tax code, so never rely solely on the stability of tax codes, you will be sorely disappointed.

2. Stick to What You Know

It is tempting to get involved in real estate investment opportunities outside of your comfort zone. Maybe the terms look good or the area is nice, but your lack of expertise in the field will ultimately hurt you over the course of the investment. If you are well versed in multi-family homes, do your best to uncover the best investment opportunities in that field. If your bag is fixer-uppers, stick with that. Success is difficult to replicate so if you have a knack for something, exploit that knack.

3.  Compare, Compare, Compare

As any real estate agent will tell you, valuations for a new home put on the market are a direct reflection of other sale prices of similar properties in that area. Your potential investment is the same way. If you are going to rely on rents to make back the money spent on the investment, compare the rents your prospective investment property takes in against similar properties in the area. Are they too high? If so, that may indicate future trouble filling the building at those prices, which then cuts into your profit forecast.

If you are getting involved in a fixer-upper, compare what you think the home will be like in the future to homes that have sold that look similar to that now. Doing so will help you estimate your eventual sale price and the amount of money you should invest to net a decent return.

4.  Hammer Down True Expenses

Just as you want to examine what your incoming cash flow will be on any real estate investment opportunity, you want to investigate your outgoing cash flow as well. Sometimes properties can look great when you examine the rent payments coming in but then lose their luster when you look at the cost of running the facility. You need to investigate both sides of the story to get an accurate view of the financial future of your investment.

5. Know The Building

In real estate investing, surprises are usually costly. Not only should you do a full walk through of the prospective investment yourself, you should also look into hiring an independent, professional home or building inspector as well. Uncovering problems with the foundation, roof or furnace early can either save you from making a poor investment or give you ammunition to negotiate a lower price.

Remember that not all real estate investments are the same and you will likely run in to a unique problem on every property you pursue. However, by sticking to the tips here, you can give yourself a great foundation from which to operate. Above all, pursue information on the property as vigorously as possible and take advantage of your local CENTURY 21 Frontier Realty professional for assistance!

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