Questions to consider before investing in Real Estate.

4 Replies

Happy Wednesday to all!

I wanted to get some feedback on questions other Real Estate professionals consider before each potential investment. I know for my firm our biggest one is, "LOW BASIS". Is the asset valued under market? This provides room for error and unexpected value-add expenses that may arise.

I listed 10 questions to get the discussion started. Please comment if you consider any of the same questions and talk about your process in doing so. Also feel free to input more questions that are important to you in your decision making process.

#1. Do you consider yourself to be a passive investor or an active investor?

#2. Whats your typical investment timeline? Whats your exit strategy?

#3. Do you consider the tax benefits?

#4. What makes a particular investment attractive to you?

#5. How do you determine your capital stack? More debt or equity?

#6. How did you decide on your asset class?

#7. What due diligence do you conduct to determine market feasibility?

#8. What makes you confident that you will qualify for a loan? 

#9. Do you prepare a plan of action if we hit a downturn in the market?

#10. Have you ever considered crowd funding? If so, did it work?

Fletcher Clardy III, Clarity Equity Group, Kansas City, Missouri

@Fletcher Clardy great questions:

#1. Do you consider yourself to be a passive investor or an active investor? Active

#2. What's your typical investment timeline? What's your exit strategy? Long term, no exit as my investments are to accumulate wealth and retirement income in years to come.

#3. Do you consider the tax benefits? Yes, there are benefits to having RE investments. 

#4. What makes a particular investment attractive to you? cash on cash ROI. Let the rent pay the investment with low initial cash. Leverage equity to acquire more RE.

#5. How do you determine your capital stack? More debt or equity?

#6. How did you decide on your asset class? SFR is easy and low maintenance but Multifamily have more leverage as vacancy will still be able to cover costs and debt repayment.

#7. What due diligence do you conduct to determine market feasibility? Focus on 1 or 2 markets to know the history and see the growth opportunity. Near large metropolitan areas will eventually get closer to my market target.

#8. What makes you confident that you will qualify for a loan? I do my homework. Work backward know what's needed to qualify and keep all docs ready knowing what loan programs I qualify for.  

#9. Do you prepare a plan of action if we hit a downturn in the market? Keep a few unmortgage properties to dispose of if needed. Also as I acquire RE keep a higher % of back up funds.

#10. Have you ever considered crowdfunding? If so, did it work? Yes, I have done it and it has worked the contract and LLC is the key for it to be successful.

@Guifre Mora Thanks for your reply.

My favorites from your response would have to be 

#9. Do you prepare a plan of action if we hit a downturn in the market? Keep a few unmortgage properties to dispose of if needed. Also as I acquire RE keep a higher % of back up funds.

#10. Have you ever considered crowdfunding? If so, did it work? Yes, I have done it and it has worked the contract and LLC is the key for it to be successful.

I believe every investor should have a plan for the downturn. The market is cyclical and we have been at the top for a while now. I also diversify my investments among other things non-related to real estate. 

I have mixed emotions about the crowdfunding. I continue to see and learn about more and more platforms. I think it is a great way to get started though.  



Hey @Fletcher Clardy , I'd be happy to talk shop with you sometime!  I'd also encourage you to get out to some of the local real esate investor meet ups and to schedule coffee sessions or the like with some of the players here in town.  Those positive associations will help push you beyond a lot of the mistakes that me and a lot of other investors have made along the way.  :)

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