How to choose the right investment property ? Know what you are doing. Part 1.
Almost every day, we will receive a call or an email from an investor looking to pick up an investment property or a homeowner looking for a property that “needs work”. Often times, they will ask “what about foreclosures ? ” “what about HUD homes ? ” and the like ?
The good news is that there are plenty of opportunities out there and always will be in my opinion, in both sellers markets and buyers markets. The strategy is to know what you are doing from the beginning before getting your feet wet. We have met with countless sellers who made in their opinion “a great investment” and when we go to meet with them, unfortunately we may have to tell them that their investment was not so great, either because they overpaid, they did not understand the comparable sales, they were mislead, they underestimated the costs of rennovations…etc.
On the flipside, we have helped so many investors be very succesful on the investment properties they have bought and sold or continue to own and are collecting rents each month. Some of those testimonials can be seen at our homepage - testimonials .
Below is a short checklist of items to consider. I WILL TAKE EACH POINT AND EXPAND ON THEM IN LATER POSTS:
1. Know your goals - Is your goal resale ? Long term buy and hold ? Immediate cash flow ? Income ?
2. Selecting a property - know your local market or work with an expert who does.
3. Purchase price - Your money is made when you purchase, not when you sell. We typically look to buy investment properties for 15 to 20 percent below market.
4. Financing - have your financing ready to go if you are not paying cash. This is critical especially in today’s market where financing is tight. It will also be critical to know to look at how the financing relates to the cash flow and the investment value of the property.
5. Rennovation - get a qualified contractor who can give you an honest assesment of what your rennovation costs will be.
6. Plan for Problems - allow a 10 percent cushion for any unforeseen problems. That way if a problem does arise, you will handle it with veins of ice and calmness.
7. Always keep an open-mind and be willing to learn - The more you do, the more you learn. Learn from your mistakes and from your successes. Do not be afraid to fail.
8. Reevaluate and reassess - Examine your goals and your investment properties periodically as what you can do to improve the property or adjust your plan for the next one !
If interested in buying or selling investment properties in the Philadelphia area, feel free to contact Chris and Stephanie Somers at thesomersteam@yahoo.com and visit our site www.thesomersteam.com .
The Philadelphia Real Estate Blog
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