To best identify quality investment the Professional Investor will take the following process to identify potential investments.
LOCATION – what city, county, state?
PROPERTY / INVESTMENT TYPE – SFR, condo, duplex – 4 plex, looking for number of units
NEIGHBORHOOD CLASS & POTENTIAL TURNOVER – what is the age and condition of the neighborhood, who are the tenants likely to be, will they stay long and care for the property?
BEST RELATIVE VALUE – comparing among the potential investments the (1) lowest relative price for the amenities provided, (2) best cash flow relative to comparable areas, (3) best price per square foot.
PROFORMA ROE (Return on Investment) – next is to estimate market rents and likely expenses.
CONDITION – what repairs should be done immediately, what deferred maintenance is there, and what capital improvements are there (roof, hvac)?
REVIEW THE NUMBERS AND DECIDE – if the numbers, area, and condition match up with the expected requirements for investments then pull the trigger and move forward.
