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