"Do The Research": Part 1 of a 6 Part Series on Buying Real Estate
Here in Pittsburgh PA and everywhere else, buying a home or investment property is a systematic process that requires strategic planning. In this series, I will discuss 6 steps that can lead to a more successful buying venture. Whether it's your home, an investment, or a business, the same steps are followed. Come back over the next few weeks to consider the ideas presented as you move toward realizing your real estate dreams.
Step 1: Research
Remember the old adage "Measure Twice--Cut Once"? This is some pretty good advice when jumping into the real estate world. For most of us, a real estate investment will be the single most expensive financial decision of our lives. Whether it's your first home or investment (you're upsizing OR downsizing), ya gotta do the research! Or maybe you're looking to locate/re-locate or grow your business. "Where do you start??"
Well it's not by just jumping on the internet or in your car without knowing what you want. A successful transaction starts with thinking about your needs, your desires and what you want to accomplish with your purchase. In other words, with research. When buying a home, think about your needs, your work commute, your lifestyle, personal leisure activities, family influences and so on as these concepts will come into play here. How do you want to live? Not what you want to live in, at least not yet. Take time to consider how you live and then begin to think about the kind of home that fits your needs.
Likewise when investing in property, ask yourself, "Are you ready to be a landlord?". If you have never been one, research what that means. Find out as much about real estate investing as you can so you are ready for the challenge. Determine if you are buying locally or better suited to be an out of town investor. In either case will you be able to accomplish everything by yourself or do you need a team of people?, "boots on the ground" or do you need to solicit other more experienced people for guidance? What type of property best fits what you are trying to accomplish? Is it a house hack, a flip, a Single Family, a Multi-family Unit, or something else? Many questions need to be asked prior to actually looking at properties.
Some questions home buyers should be asking themselves include:
How far are you willing to commute to work? Do you need easy access to travel hubs or do you work from home?
Work commitments: If you commute to see clients, do you need easy access to freeways to get your day going? Where are your customers?
Education: How close are schools for the kids? What about you? Continuing Ed??
Sports: If you're a sports nut, do you need access to sports venues? Are there walking/running/biking trails around?
What about leisure activities? Where are the parks, the resorts, shopping, restaurants, and the FUN spots?
Crime: Got a feel for local crime rates? That beautiful home might be a block away from some nasty statistics.
Some questions investment property buyers might ask themselves include:
What kinds of return on my investment am I looking for? What kind of rents are achievable based upon various areas and what would be my GRM (Gross Rent Multiplier)? What will my expenses be? Am I financing or paying cash and what is LTV (Loan to Value) and DCR (Debt Coverage Ratio)? What would be my GOI and NOI on a purchase? And there are so many more acronyms and calculations to consider in comparing properties.
How far do I want to travel to my property? Or if out of town, will I have the right people in place to manage it for me?
What kind of tenant am I trying to attract?
What area is best to invest in, where are the up and coming markets, where can I make a profit?
What kind of amenities are available for my renters?
Crime: Same as above as you have to think about any potential liabilities with investing in certain areas.
How long do you plan to hold this investment? When might you outgrow the building where your investment is located?
Now add your own personal questions to those listed above. What we have discussed is just a taste of the research you must do to get started. Looking at homes or investment properties can be fun. But if you haven't done your homework, do you really know what your goals are?
Most people don't go on vacation without some idea where they want to be when they "get there"... it's no different in finding and buying property. Wow.. I have a week off.. I think I'll just drive somewhere and hope I have a good time. The results could be disappointing! So do your due diligence and research your real estate venture first, then you will be ready for the next step.
Next up: 2. Get your Finances in order. - Stay tuned for the next episode
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