A lot of people are getting involved in real estate investing, and for good reason. It is by far the best way to replace your income and build your wealth. However, before investing your hard-earned money into real estate, it is wise to ask important questions about the property, yourself, and your goals. We caught up with tax attorney and real estate investor Brian Boyd, author of Replace Your Income: A Lawyer’s Guide to Finding, Funding, and Managing Real Estate Investments for his expertise on what important questions you need to ask yourself before plunking down your money. Ask yourself the following:
Is this a property that I would be willing to live in?
This question places the property in a perspective that is more important to you than you know. Why is it important to you? Because you do not want to be a slumlord. You want your investments in the community to reflect your character. Thus, you must be willing to either make the property something you would live in or make it something you are not ashamed of. Every property you own, whether it is a single-family home, a duplex, apartment complex or a short-term rental should be safe, warm, free of pests and rodents, have operable utilities, and be clean. If the property you are looking to buy as an investment does not meet those criteria, then you should not buy it or buy it and make it that way. Investors owe our communities our best efforts, and you owe it to yourself and your legacy to own good properties.
Does this property help me?
Real estate as an investment, whether short-term or long-term, should help you financially and holistically. This is not a New Age philosophy espoused to give you spiritual guidance. This is simply advice to new investors to take stock of themselves before they become responsible and accountable to others. In this case, those others are your tenants, City or County Code Inspectors, and a host of other people that you have never met. If you are not ready to be a landlord, are you ready to hand over the responsibility for your investment to a property manager? This is important because that property manager is now in control of your investment. Property managers can be life-changing for the better, but no one cares more about your investment than you do. So, does the property help your financial picture, and does it enhance or diminish your enjoyment of real estate investing? Financial success can be mutually exclusive of your holistic being. Turning the day-to-day issues over to someone else can be your answer to enjoying your investment. There is no wrong answer to this question, but there is always an answer for you that will bring you peace of mind.
Does this property help me get closer to my goals?
As you move forward in your investing life with real estate, you will see many different ways to invest. Long-term, short-term, residential, commercial, land, storage units, flipping contracts, wholesaling of contracts, and the list goes on and on. Does your target investment help you achieve your ultimate goal? Does buying a single-family long-term home help you get closer to your goal? Or should you buy a short-term rental? Does this purchase meet your budgetary requirements, or are you getting too far beyond your comfort level? Have you underwritten this property? Does it make financial sense? Will you make the profit you need to in order for this investment to be a sound buy? Is there another property that you could do better on? Ask yourself these questions before you consider making an offer on a property.
Once you decide that you want to make an offer, it is helpful to take a few hours and do some quick research. Here is what you need to do:
- Check the flood zone maps for this property- FEMA has maps of the entire country for you to review.
- Check the crime rate of the area- the internet is full of crime statistics for just about every zip code.
- What are the rents for the area? – Rentometer.com will give you an up to date barometer of the current rents in that area.
- Walk the property with a contractor and if you make an offer- GET AN INSPECTION and then walk the property with a contractor so you have an idea of the costs of repairs.
- Is there an HOA? Does the City restrict Short Term Rentals in this area?
- Does the property have a tenant? Get a copy of the lease or the last lease that was in place.
- Call your lender and get an idea of what your payment will be each month- Numbers matter.
With the above list completed, make an offer. You will never get your second property if you don’t get your first. Anyone can do this; new ventures can be scary, but so was that first time you rode a bicycle and look at you now! I wish you the best of luck in your real estate investing.
About Brian T. Boyd, Esq.
Attorney Brian Boyd helps clients with real estate, construction, and other business matters, while at the same time growing his real estate portfolio to a six-figure income. He earned a JD from Samford University’s Cumberland School of Law, and an LLM in Taxation from Georgetown University Law Center. His newest book is Replace Your Income: A Lawyer’s Guide to Finding, Funding, and Managing Real Estate Investments.