Finding the right real estate investment: the more you know upfront the better
There are an unlimited number of desirable criteria that an investor can use to select an investment. Some investors look for a specific type of property such as a townhouse or a duplex with a specific number of bedrooms. The list of criteria can also include the desire for a specific view. A specific view can add value to a property. There is a lot to consider when it comes to the parking alone: is there a garage or how many parking spaces are there? Proximity to stores, parks and schools can mean an increase in rent. Distance to transit systems, community centres, places of business and entertainment facilities can also have an influence on the desirability and hence the rent.
It is important to have your criteria fit why you are investing: are you investing for cash flow or are you investing for capital gains? Cash flow investors should be concerned with selecting a property based on the criteria that gives them a positive monthly cash flow. This can include monthly rent, monthly heat, and if utilities and cable can be charged down to the renter in a given area. Capital gains investors should be concerned with how they can sell their investment at a higher price then they paid for it. For example, is the area one where larger houses sell for a significantly higher price per square foot than smaller houses so that a renovation and resale can be done.
By mapping out criteria in advance, it is easier to begin shopping for an investment property. A well written plan with stated “must haves” and “nice to haves” is critical to successful investing. Having such a list makes it easier to communicate with others when searching for an investment property. Furthermore, you’ll be able to say “no” to certain investments faster when for emotional reasons you may be tempted to buy.
It is also of value to categorize your criteria and link them to your investment goals. This will help you to determine which criteria are “nice to haves” and which are “need to haves.” Three useful categories are (1) Deal Points – for example price and occupancy date (2) Property Points- for example location and style of house and (3) Market Trend Points- for example vacancy rates and zoning by-laws.
The advantages of putting together a list of criteria are endless. If you don’t have criteria you are likely to waste your time looking at properties that are unsuitable. Just like making a grocery list, you will save time and money. Since there are plenty of criteria to choose from it is imperative that you understand which ones are “need to haves” and which ones are “nice to haves.” That way you’ll know what you want and it will be easier to find that successful investment property.