5 Questions To Ask Before You Buy Investment Property

By Author: Alexandria Anderson
Total Articles: 46
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Deciding to invest in real estate 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 am I interested in? Are you interested in a single-family unit, a duplex or maybe a multi-family complex? Are you interested in hotels or motels? What about raw land? How you answer this question will determine other things that you do later, such as how you decide to actually pay for the property. It is also best to choose one direction to pursue so you don't go on wild goose chases and so your team knows what they should be helping you with.

What area am I interested in? Are you going to invest in the city where you live? If not, what part of the nation are you interested 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, once you have decided on a part of the country and a city in which to look, you will need to decide on a neighborhood. 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 existing equity) will determine how you can buy the investment. If it is a smaller investment 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 investment property that has made money in the past, the bank will probably give you a loan. They know that they will make money on the deal regardless of what happens to your investment. If you are looking at a larger piece of land that you can't afford outright, you will probably be able to get partners or other investors to contribute.

Do you have a team in place? It's just too hard to be successful at this without a good team. This is simply because of the large amount of work involved, and so many disciplines of knowledge involved, 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 says you start with an attorney, an accountant, a broker and a management company. After that, you may also need appraisers, tax consultants, a surveyor, a structural engineer, an architect, an estate planner and more.

What is your repair budget? 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 yourself into and whether you can afford it.

This is by no means an exhaustive list of questions. Once you embark on your investment property adventure, you will find a consitent list that you will need to address. But these will get you going on the road to asking yourself the best questions. Sometimes asking the appropriate questions is more important than the answers themselves.