5 Questions To Ask Before You Buy Investment Property

by Frank Collins

Deciding to buy investment property is one of the best decisions you will ever make for your future. However, it isn't something you can decide to do one day and then rush out and do the next. There is a process that you have to learn and lots of information to digest. If you think you have done that already and you are now prepared to go out and make your first purchase, here are five questions to ask that will help you to prepare.

What type of investment property are you interested in? Are you interested in a duplex, multi-unit complex, or perhaps just a single family home? Are you interested in commercial real estate? What about undeveloped land? How you answer this question will determine other things that you do later, such as how you go about financing your investment. It is also best to focus on a particular type of property so you don't go on wild goose chases and so your team knows what they need to clue you in on.

What area am I interested in? Are you going to invest in the city where you live? If not, what part of the country do you want to invest in? The Internet is the best resource for determining what area of the country you would like to put your time and resources into. Ken McElroy, author of “The ABCs of Real Estate Investing,” calls this Level I research. Later, when you have determined a part of the country and a city in which to look, you will need to decide what neighborhood interests you. You will find that during McElroy's Level II and Level III research.

Do you have a financing strategy? The type of property you are looking for (as well as your own assets) will determine how you can make your purchase. If it is a small property such as a house, you may want to pay for it outright. However, even if you don't have the money to pay for it, if it is a piece of property that has made money in the past, the bank will probably give you the finacing you need. They know that they will make money on the deal regardless of what happens to your investment. If you are looking at a large property that you can't afford outright, you will probably be able to find other investors to partner with you.

Is my team in place? You can't do this successfully without a team. That is simply because of the large amount of work involved, and so many different types of expertise needed, that you simply can't do it all. There is not enough time for you to become proficient enough with real estate law and accounting, plus broker your own deals and manage your own properties. You have to delegate. That is why McElroy recommends you start with an attorney, an accountant, a broker and a property manager. After that, you may also need appraisers, tax consultants, a surveyor, a structural engineer, an architect, an estate planner and more.

How much do you have to spend on repairs? This is essential. Knowing this will help you determine what areas to look around in because some areas may be full of old buildings or some newer buildings may actually be in need of a lot of upgrades. You will want to what you are getting into and whether you can handle it.

This isn't a a complete list of questions. Once you embark on your real estate investing adventure, you will find a never-ending list that you will need to address. But these will get you going on the road to asking yourself the right kinds of questions. Sometimes asking the right questions is more important than the answers themselves.

About the Author: Alex Anderson is a licensed Realtor from Minneapolis, MN who specializes in Minnesota Investment Property. Visit her website at http://minnesota.greatinvestmentproperty.com for more information on Minnesota Real Estate Investing.

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