How to Look at Property Like an Investor

4 Replies

How to look at your property like an investor is not always easy. You need to always treat your property like a business. I can say this because an investor myself who’s owned both Single and Multi-Family properties over the years I have probably made every mistake you can think of to make. If I can help other people not fall into the same pitfalls I did then this will be well worth my time to write.

First thing is to never let your emotions dictate the deal. Don’t fall in love with the house or the investment. The numbers will make it a good deal and dictate whether it’s something you do or don’t want to buy depending on what your business model is. Sometimes investors will want to buy a house on the same street that they live on thinking the proximity will allow them to keep a close eye on it. So very wrong, go where go the deal is not where you wish it to be.

Smart investors will have a team that they can use to help them make smart decisions. I always find it interesting that when an investor is looking for a home they will use a professional like a real estate agent to help locate it, For money they use a bank or hard money lender and for closing they use a title company. But when it comes to actually running the property to get the financial return back out of it. This is the point that they feel they should do on their own. Most of the time without any formal education or training on laws or regulations. I know because I was one of those people at first. I did not understand the power of having a team and utilizing leverage. Leverage that team so you can buy properties in another parts of town, where the best deal is. Don’t buy an investment property only to have a second job. That’s not investing, it’s a surefire way to failure. Just remember the real estate investor is the highest sued in the industry.

Whether you have one property or 50 properties, you own a business. Treat it that way. Be professional, and always write and follow strict policies and procedures. If you don’t have a business plan in place, create one or partner with a property management company team that can help you be successful with your property. You need a plan for where you want to go and how you want to get there. 

Good points, @Kevin Davidson  . I'll be keeping these things in mind as I seek to grow my business this year.

@Kevin Davidson  Good notes.

When emotions goes up... intelligence goes down.

I hear "day job" investors talk all the time about investing for tax write offs....  That scares me... if you aren't creating deals to make money and profit... then you got a screw loose.


Frank 

Frank Romine, Real Estate Agent in CA (#01957844)

@Kevin Davidson  Thank you for posting this. I am looking at my first rehab property right now and actually have my offer going in today. Luckily, the numbers work but, I did FALL IN LOVE with this property when I first saw it. 

I had to step back and make myself snap out of that but, it happens very easily. 

Now I still love the property but that is because my ROI is very good and if that changes, so does my love for that property.

Some good tips, but I believe that looking at a property must also be done through the eyes of the consumer, a buyer or tenant. You don't want to fall in love with the place, but you do view it as to its appeal, the functionality of a property, the wow factor however little that wow might be, the question is ...... Is it marketable?

It's all right, in fact necessary to a point, to think in emotional terms about a property, but you don't ever want to buy emotionally.

RE is not just about numbers, the numbers tell you if it's a deal, if it cash flows, if it can be an investment, but without the need being served to a consumer, the utility function being provided, you got nothing.

Pretty much why investors rehab and update a place, but you need to see it in your mind's eye as being appealing as well as meeting the need.

Initially, I look at a place (starting at the street) asking myself "Would I live here?" or "Have I lived in a place like this?" Location, location, location, you know that before you step foot on a property, can I expect people to buy here or rent here? Or you should know.

Looking at intrinsic values is a business valuation, the demand is often based on intrinsic values, the view, being next to a park or on the water or where the "action is" downtown. These attributes don't always show up in the numbers, but can. 

I agree with the idea that you need to be business minded, but you also need that personal feeling standing in the shoes of those you're trying to sell or rent to, how you can perceive it may be how they perceive it.

Good initial thoughts up there. :)

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you