Five Questions To Ask Before You Invest In Real Estate

Five Questions To Ask Before You Invest In Real Estate

Deciding to invest in real estate is one of the best decisions you will ever make for your future. 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 five questions to ask that will help you to prepare.

What type of property are you interested in? Are you interested in a single-family unit, a duplex or maybe a multi-family complex? 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 go about financing your investment. 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 your best resource for determining what area of the country you would like to put your time and money into. Ken McElroy, author of The ABCs of Real Estate investing, calls this Level I research. Later, once you have decided on a part of the country and a city in which to look, you will need to decide on a neighborhood. You will discover that during McElroy's Level II and Level III research.

Do you have a financing strategy? The type of investment property you are looking for (as well as your own assets) will determine how you can make your purchase. If it is a small property such as a house, you may want to pay for it outright. However, even if you don't have the money to pay for it, if it is a investment property that has made money in the past, the bank will probably give you the finacing you need. They know that they will get a ROI regardless of what happens to your investment. If you are looking at a large property that you can't afford outright, you will probably be able to find other investors to partner with you.

Is my team in place? You can't do this successfully without a team. This is simply because there is so much work, and so many different types of expertise needed, that you simply can't do it all by yourself. There is not enough time for you to become proficient enough with real estate law and accounting, plus broker your own deals and manage your own properties. It is necessary to delegate. That is why McElroy recommends you start with an attorney, an accountant, a broker and a management company. After that, you may also need appraisers, tax consultants, a surveyor, a structural engineer, an architect, an estate planner and more.

How much do you have to spend on repairs? This is very important. Knowing this will help you determine what areas 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 yourself into and whether you can afford it.

This isn't a an exhaustive list of questions. Once you start your investment property adventure, you will discover a never-ending list that you will need to address. But these will get you started on the road to asking yourself the best questions. Sometimes asking the appropriate questions is more effective than the answers themselves.

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