| When it comes to investing, everybody has | | | | tenants may be considering a move. If tenants |
| certain goals and aspirations. However, we | | | | have a short-term lease, they may be living |
| have found that there are certain guidelines | | | | there simply to attract unsuspecting buyers. |
| every aspiring real estate investor needs to | | | | It is also important to collect the tenants' |
| know: | | | | security deposits at closing. |
| | | | |
| 1. Compare Property Values and Rents | | | | 6. Assess The Tax Situation |
| | | | |
| Financial statistics only go so far; the best | | | | Taxes are an integral part of successful real |
| measure of a property's market value is often | | | | estate investing, and they often make the |
| the sale prices of nearby properties. The | | | | difference between a positive cash flow and a |
| same holds true for area rents. A low price | | | | negative one. Know the tax situation, and see |
| can often be justified by a reasonable rent; | | | | how it can be manipulated to your advantage. |
| renters who can afford a high rent can afford | | | | It may be a good idea to consult a tax |
| to buy instead, so reasonably priced rent is | | | | advisor. |
| a need. | | | | |
| | | | 7. Investigate Insurance Coverage |
| 2. Be Careful - Tax Laws May Change | | | | |
| | | | If seller's coverage is based on |
| Don't base your tax investment on current tax | | | | lower-than-current replacement value, your |
| laws. The tax code is constantly changing, | | | | insurance cost may increase when you pay a |
| and a good investment is a good investment | | | | higher purchase price. |
| regardless of the tax code. The right | | | | |
| property with the right financing is what you | | | | 8. Confirm Utility Costs |
| should look for as an investor. | | | | |
| | | | Ask the local utilities to verify recent |
| 3. Specialize In Something You Know | | | | utility expenses, especially if any of these |
| | | | costs are included in your tenant's rent. |
| Start in a market segment you know. Whether | | | | |
| you focus on fixer-uppers, foreclosures, | | | | 9. Consult Your Accountant |
| starter homes, low-down payment properties, | | | | |
| condominiums, or small apartment buildings, | | | | Taxation is a key element of successful real |
| you'll benefit from experience by | | | | estate investing, so be sure to find an |
| specializing in one aspect of investment real | | | | accountant who is well-versed with the |
| estate properties. | | | | constantly evolving tax code. |
| | | | |
| 4. Know The Costs Going In! | | | | 10. Inspect! |
| | | | |
| Know the financial statements inside out. | | | | Make sure that you always perform a thorough |
| What are operating expenses? What are loan | | | | inspection of the property before buying it. |
| payments? Vacancy costs? Taxes? What does the | | | | Never, ever buy any property without at least |
| cash flow statement look like? These are key | | | | examining the site. In some cases, hiring |
| issues that must be addressed before making a | | | | professional inspectors to examine the |
| solid investment. | | | | structural mechanical system may be a sound |
| | | | investment. |
| 5. Know Where Your Tenants Are Coming From | | | | |
| | | | (c) Copyright 2005 Madan Ahluwalia. All |
| If the last rent increase was recent, your | | | | rights reserved. |