Finding a Property

Okay, so you have your financials in order, you have educated yourself about investing, you have a team or at least are putting one together and you are chomping at the bit to find a property. Great!

Now before find a property you just need to decide what type of real estate investment you want. One of the first things to ask yourself is what do you plan on doing with it. If you are wanting a long term rental then I recommend starting with residential real estate. I believe it's a little easier to start out with and here's why... If you get, let's say a 3 bedroom single family house and rent it out and for whatever reason decide you need to sell it, a single family home is much easier to sell.

Some people want to jump right into commercial properties and while that's okay, I don't recommend it. Commercial property is great, don't misunderstand me, but it typically takes longer to get a commercial piece of property rented and they typically cost more. This can be discouraging to a new investor. Some people start this way and do fine, but for the average person I think it's best to start with a residential property.

If, however, you are wanting to restore and flip a property then again I recommend a residential house, but you can flip commercial property as well. Just know that a commercial piece probably won't sell as fast as a residential house.

If you strictly want to flip and do not want to rent or lease your property out, then I would avoid multi-family houses. Here's why... In theory you could buy a duplex, triplex, four plex, or apartment building and flip it, but this is more difficult to do. An investor will want to see the financials of the property, ex. rent roll, income and expense, etc in order to determine their ROI (return on investment, cap rate). They could present hypotheticals to their bank, but they have a better chance if they can show real financial past performance and not hypotheticals. So if you haven't rented it and it is empty, you cannot show them anything. Again, some investors might still buy it, but not as likely.

Finding a Property - Where to Look

I'm going to talk in generalities here and give some very basic advice. If you want more information about looking for a specific type of property, click on the nav bar to your left for the type you want to know about.

Okay... You've heard it said "location, location, location". Well when finding a property that still holds true to this day. You do not want properties that are in horrible spots. Pay close attention to what is going on around you.

I recently bought an old multi-family house in the town I live in. At one time this was a bad area. Lots of drugs and crime were in this area. If you notice, crime will move around a little bit. In some cities there are just plain, old bad areas that are always bad. But in some midsize towns such as the one I live in, crime will move around a bit. The reason why is that once the police are aware an area is having a lot of drug activity or something of the sort, they will begin to patrol that area and eventually the bad guys will move to another spot. This isn't something I made up, I talked to the police before buying into this area and they are the ones who informed me of this.

Just a few blocks away from this property is the downtown area and there are some big developers rebuilding that area into a very nice, upscale area. It is really a cool thing. So I bought this property based upon where I see it going in the future. A smart investor looks ahead.

In one of his audios, Robert Kiyosaki points out that a savvy investor doesn't try to just get a property at a low ball price. But rather they like finding a property that they know in a year or two will make them a lot of money.

For example, some people think it's really savvy to buy a million dollar property for $700,000. While that is a good deal it would be better to pay one million dollars for a one million dollar property if in a year or two it can be worth two million dollars than to buy a million dollar property for $700k and it still only be worth one million in a couple years. Do you see?

So look around you and visualize what the area is doing. Is it going up or going down. Then look at the property itself. Are there some easy simple things you could do to bring the value up? Such as basic remodeling, or an addition of some units... Look for the diamond in the rough. Do not just buy based upon cash flow.

In other words, don't just buy a cheap property because you can make money off of the monthly rent since it is so cheap. Always consider both cash flow and appreciation. Appreciation comes when you buy in a good area and take care of the property.

Finding a property can take a little bit of work, but if you find the right property, it' can be very profitable.

• Finding a Property Part Two