Five Questions To Ask Before You Buy Investment Property
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 hotels or motels? 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 focus on a particular type of property so you don't go on wild goose chases and so your team knows what they need to clue you in on.
What area am I interested in? Do you want to invest in the city where you live? If not, what part of the nation are you interested in? The Internet is the best tool 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, when you have determined a part of the country and a city in which to look, you will need to decide what neighborhood interests you. You will discover that during McElroy's Level II and Level III research.
Do you have a plan to pay for it? The type of investment property you are looking for (as well as your existing equity) will determine how you can buy the investment. 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 piece of property that has generated cash flow in the past, the bank will probably give you a loan. They know that they will get a ROI regardless of what happens to your investment. If you are looking at a larger piece of land 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. That is simply because there is so much work, and so many disciplines of knowledge involved, that you simply can't do it all. 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 a lawyer, 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.
What is your repair budget? This is very important. Knowing this will help you choose the areas of town 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 want to what you are getting yourself into and whether you can handle it.
This isn't a a complete 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 path to asking yourself the best questions. Sometimes asking the right questions is more important than the answers themselves.
About the Author: Alex Anderson is a Minnesota Investment Property specialist. For more information on Minnesota Investment Properties visit her website at http://minnesota.greatinvestmentproperty.com.
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