First Things First – here are some things to think about when you are considering purchasing an investment property:
- What are your goals with the property?
- How long do you expect to own it?
- Have you owned investment real estate before?/How did that work out for you?
- How much cash do you have available for a down payment?
- What is the source of that cash?
- Do you plan to hire a property manager?
- Are you willing to buy a property that needs some up-front repairs and updating?
- Ideally, when would you like to get started?
Second, Things to Look For – when we consider a property, it makes good sense to first give it a thorough visual inspection. Here are the items to focus on:
- Roof: Does it look like it will need a replacement soon?
- Siding: Low maintenance brick or unmaintained wood siding?
- Flooring condition: In need of replacement or refinishing?
- Kitchen condition- what condition are the countertops, cabinets and floor in?
- Are the appliances in need of replacement?
- Do the bathrooms need of updating or repair?
- Mechanical: HVAC and electrical in need of service or replacement?
Once you have made an offer on a property and that offer is accepted, you will have the chance to hire a
professional home inspector who will give you a detailed report on the property.
Third, The Vital Signs – these are some important numbers that should be analyzed:
- Down Payment
- Property Tax Amount
- HOA Fees
- Projected Rental Income
Fourth, Economic Drivers to consider:
these important numbers:
- Yearly maintenance percentage
- Appreciation forecast as a yearly percentage
- Vacancy forecast as a yearly percentage
Fifth, Analysis Outcome:
- Before Tax Cash Flow
- After Tax Cash Flow
- After Tax Yield
- Cap Rate
- Cash on Cash return
There is financial risk associated with investing in real estate. We cannot make any guarantees of financial performance. Be sure to consult with your attorney and accountant before making a purchase.