HOW TO CHOOSE THE RIGHT PROPERTY FOR YOUR BUSINESS MODEL
Choosing the right investment property or investment vehicle is critical to the success of your long-term investing goals.
There are 4 main factors that should be considered when acquiring investment property:
1. Sales and rental comparables.
Comparables (comps) are properties that have both sold and rented within the past six months that is the near the subject property that has the same:
2. Condition of the neighborhood.
The condition of the block and surrounding area as the subject property is essential. You can always affect the condition of your property, but not the properties other properties on the block.
Get time/date-stamped photos to verify this (or a second set of eyes that will verify the property you're considering is on a good block).
Get pictures of:
3. Cash Flow
Make sure the rents are within range for the area. If you're purchasing a tenanted property, get rental records to show payment history.
Get the tenants income information- is the rent realistic for their current income. Get a credit report - does the tenant have judgments, liens, or garnishments. This severely affects the continuation of the cash flow. Have these independently verified by a reputable property manager.
4. Title
Are you purchasing the home via warranty or quit claim deed?
Was the current ownership verified so that you'll know you're purchasing from the actual owner?
Will the seller be able to provide a title policy that will protect your free and clear ownership for the duration of the time that you'll own the home?
Without clear title, others can make claims, sell the property or attempt to collect your rents!
There are 4 main factors that should be considered when acquiring investment property:
1. Sales and rental comparables.
Comparables (comps) are properties that have both sold and rented within the past six months that is the near the subject property that has the same:
- Area (within a 1/2 mile and not crossing into a different neighborhood)
- Exterior
- Square footage range
- *these comps should be made available from any scrupulous property broker trying to sell you property
2. Condition of the neighborhood.
The condition of the block and surrounding area as the subject property is essential. You can always affect the condition of your property, but not the properties other properties on the block.
Get time/date-stamped photos to verify this (or a second set of eyes that will verify the property you're considering is on a good block).
Get pictures of:
- Front of home
- Both sides
- Rear
- Home across the street
- Homes to either side
- General block (note the number of vacant, burned or abandoned properties)
3. Cash Flow
Make sure the rents are within range for the area. If you're purchasing a tenanted property, get rental records to show payment history.
Get the tenants income information- is the rent realistic for their current income. Get a credit report - does the tenant have judgments, liens, or garnishments. This severely affects the continuation of the cash flow. Have these independently verified by a reputable property manager.
4. Title
Are you purchasing the home via warranty or quit claim deed?
Was the current ownership verified so that you'll know you're purchasing from the actual owner?
Will the seller be able to provide a title policy that will protect your free and clear ownership for the duration of the time that you'll own the home?
Without clear title, others can make claims, sell the property or attempt to collect your rents!