Congratulations! You’ve decided to become a real estate property investor. Now that you’re preparing to select your first property, it’s critical to know what to look for and be prepared before you sit down to sign your first deal. In fact, there’s quite a bit of prep work that goes into evaluating a property before you even start seeking one out.
5 Things To Consider When Evaluating A Real Estate Investment Deal
1. Know if you’re planning to hold onto the property or flip it.
Don’t wait until you find the perfect property to decide if you’ll use it as a rental property or flip it. That decision should be made far in advance.
The reason being, you’ll want to look for the specific type of property to flip. Conversely, if buying and holding is your deal strategy, you’ll want to specifically seek out potential rental properties to rehab.
The properties will likely differ, as well as the neighborhoods. The end game should be known from the very beginning.
2. Identify one or more contractors you plan to use.
As soon as you secure the deal on a property, you’re going to want to begin the rehab process. Waiting until you have the deal to start interviewing and evaluating contractors is going to leave you wishing you had lined them all up beforehand.
If a contractor is good, he or she is probably already working on a property. Therefore, once you interview and discuss a future rehab with a contractor, you want to get an idea of how quickly they can complete a renovation.
Ensure that you align yourself with a contractor you’re confident can handle the job—and who’ll also be available when you need them.
3. Assemble the rest of your team, too.
Just like contractors, you’ll need additional resources on your team to complete the deal. A good real estate attorney by your side can make all the difference. They can represent you when you find a property and ensure your deal is lawfully secured.
Similarly, arm yourself with a realtor interested in helping you locate potential properties and representing you both with the buying of that property, and with potentially renting it or selling it after the rehab is done. It’s not a bad idea to choose a realtor that has personal experience rehabbing properties – as many realtors do. They would have a keen understanding of the process and can help you avoid pitfalls during both the initial deal and the renting or selling of the rehabbed property.
A hard money lender financing partner is also key to structuring your deal in a way that’ll give it the best chance to earn the money you seek. A financing partner, like Ashmore Partners, adds a high level of consultative expertise to elevate your real estate property investment team.
It goes without mentioning that many investors find great benefit from working with a mentor, such as those offered through the mentorship programs at BetterFlips.com. Nothing compares to having an experienced investment strategist by your side every step of the way.
4. Invest in an area you understand.
You have to understand the market dynamics within the town(s) in which you plan to invest. Even more specifically, when investors hone in on particular sections of towns, they can begin becoming experts in those particular areas. This allows you to learn the value of rehabbed properties for sale or rental properties.
When selecting an area, it’s important that you can physically get to a property 1-2 times per week – ideally more often. You will want to personally monitor the progress of your rehab, meet with contractors, and make key decisions in person whenever possible.
Some particular areas that are attractive for real estate investors right now, include:
Haddonfield, NJ, Brewerytown in Philadelphia, Strawberry Mansion in Philadelphia, Germantown in the outskirts of Philadelphia. West Chester, PA., and Downingtown, PA.
5.Understand the numbers.
Now that you’ve prepared yourself with your ideal deal scenario, assembled your team and identified some target areas, the key aspect of a profitable deal is, of course, ensuring the money makes sense
AshmorePartners has written comprehensive guides on calculating ROI for both fix & flip and buy & hold property investments:
Work With Ashmore Partners, The Best Hard Money Lender Serving PA, NJ, DEAll clients work directly with an Ashmore Partners co-founder to ensure stellar advice and consultation by experienced real estate investors. Our rates have no junk fees and no hidden fees. All clients receive access to our profit calculator to estimate your costs and gain visibility into a projected investment return.