What are the most important questions to answer before investing?

Question

There are alot of opinions on what or how to invest in real estate. My question is what are the top 3-5 questions every investor should answer before purchasing any property?

Timothy W. · Answer

1.  How much does it cost?
2.  What are the property taxes?
3.  What work needs to be done?
4.  What can I rent this for?
5.  What can I sell this for?

Those are the only 5 question you will ever need for real estate investing.

Michael Quarles · Answer

1) What's your exit strategy is going to be
2) Where's the money coming from
3) Based on your requirements to function how many deals must be complete and how often based upon your strategy.
4) Can you afford to market consistently for a minimum of 6 months.
5) Based upon your marketing budget how are you going to locate buyers and sellers
6) What methods are you going to use to capture the leads
7) Based upon your strategy which type of business are you going to form.
8) How are you going to learn the business
9) Whats your Fail plan?
10) Can you afford to fail and if not are you willing to live outside your comfort zone

Michael Quarles · Answer

Training is important,,

Make certain that 3 people know how to do every job... That doesnt mean the same three people.

Happy hunting

Michael

Account Closed · Answer

1) does this property fit my goal

2) what are the numbers (as Tim said)
a) Purchase price
b) Repairs
c) Re-sale price (assuming you want to re-sell it)
d) Rent that you can collect (assuming you want to lease it)

3) What's the best exit strategy?

Claude Hodge · Answer

Great discussion here guys.  For my first rental, which I hope to be getting within the month, I found one that answers this question:

Can I afford this home if it is not rented for 1 year?

Worst case scenario people, I don't think that would happen, it's just a rule I want to follow until I really know what I'm doing.  Thankfully, I found one that fits this rule very easily!

Claude

Steve Babiak · Answer

Tim's list got my vote.  I'd add to it financing considerations.  For a rental, financing will affect cashflow.  For fix and flip, financing and hold period will affect profitability.

Timothy W. · Answer

1. How much does it cost?  $27,000.00

2. What are the property taxes?  $3,000.00

3. What work needs to be done?  Unknown

4. What can I rent this for?  $2,000.00/month

5. What can I sell this for?  $60,000.00 - $80,000.00

Outside of #3 it sounds like a slam dunk, but the reason number 3 is unknown is the building is brick but the brick on the front wall is severely bowing out at the second story.  This indicates water has gotten behind the brick, rusted the brick ties and compromised the structural integrity of the brick.  To fix this, I would need to to remove the existing brick from the bottom of the bowing all the way up to the parapet wall.  Also, I need to know why this happened and could not access the roof today because of the height of the building.  I'll have to come back with a ladder.

Depending on what I find on the roof, this building will either need $5,000.00 in repairs or about $20,000.00.  If it's on the end of $5,000.00 this is a clear purchase.  If it's on the end of $20,000, I'm dropping it and moving on because I know I can do better.

It's not emotional, it's not subjective and I don't need to reinvent the wheel every time I visit a new property.

Bill Gulley · Answer

Hi, the first thing to ask yourself is, do I feel comfortable doing this, do i know what I'm doing here? While that might be an opportunity to cop out and run, but if you are in doubt get help and solve the problem. Next question, do I have sufficient funds to carry this property if my palns fail? Can you afford to do the deal? You may not have any money in the deal, initially, but if you lose a buyer, you'll need to make a decission, can I follow through? You asked for the first questions, after that, go with all of the above....Bill

Brian Haskins · Answer

When looking at a property what questions you ask will depend on what you plan to do. If you want to keep it as a rental then you will need to look at cap rates and cash flow, If your looking to wholesale then you need to look at equity, if you buying subject 2 you need to make sure the owner is open to it, and so on I'm sure you get the point. the common thread of questions are probably a little less obvious and probably not the most important because the most important question is if its a good deal. depending on what investing type will determine if its a good deal. I would say the questions you will ask on each deal would be is there a clean title? You cant buy any house without clean title. I'm guessing you will want to determine equity in most investing strategies equity is pretty important. You will need to ask yourself about financing the property and after figuring those costs will it still be a good deal. Those are some questions you can look at.

Brian Haskins

Claude Hodge · Answer

Tim, great answer man.  I am a simple kind of guy, and you said it exactly as I have thought about it for myself.

What are the most important questions to answer before investing?

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