When searching for investments a very high comfort level is very important for investors. Important because different investors feel comfortable with different types of assets. Even within residential there are a few categories important to look at, and notice your own comfort level (or discomfort level).
- PROXIMITY – how far away from you do you have to have your investment to feel comfortable? I am okay with investments thousands of miles away and never seeing it, but for some people anxiety begins if the property is outside of the city they live in.
- PROPERTY TYPE – some people like condos, others do not. Some like single family homes. Others like more units. How many units do you want on your investment property, and do you feel comfortable attached to other people’s investments?
- PRICE RANGE – this has a lot to do with how much money you have to invest, and how easy it is to get more of it.
- NEIGHBORHOOD CLASS – will you only invest in class “A” neighborhoods, or do you feel right at home in a “D”? This has a lot to do with where you live now, and where you grew up. Most people feel comfortable with what they know, and some feel uncomfortable with what they don’t know.
- PROPERTY CLASS – this is not only about when you buy, but some investors try to over improve property… make a class “C” property into an “A” in a class “C” neighborhood. Not only can it be expensive, and not covered by the increase in rents, but after a few years it is back to a class “C”.
- PROPERTY CONDITION – some investors like to fix stuff up, even if it does not make them money. Others don’t want to touch a hammer and saw. Be aware and buy what works for you, and don’t get in over your head – that can be expensive.
- RETURNS – know what returns you feel comfortable with and what you don’t. Compare the deal to the returns and take it as a whole package. Don’t just buy what looks pretty, you will regret it!
Notice your biases. What gets you wound up? What makes you feel uneasy or queasy? Is it something that is passing? Do you need to get some experience with it, adjust to it? Is it non-negotiable?
Notice and make decision that will get you to your best future.