When you are making a real estate investment for the first time, you are probably focusing all your time and attention on the potential profit that lies ahead. It's much more exciting to think about profit and payoffs than of the mundane details of the transaction. However, if you want a solid ROI for your investment endeavor then you're going to have to learn a little more about the small details.
Know the Neighborhood
Before you invest the one thing you need to know is what's going on in the neighborhood. Is it an area of growth? How hard has it been hit by the recent housing market woes? Is it a solid investment or is this a shaky proposition?
Other things you need to know depend on whether you're investing in commercial or residential real estate. If you're investing in residential property you want to know a few key things like these:
• Is the neighborhood kid-friendly?
• How are the schools in the neighborhood?
• Is there a high crime rate?
• What kind of people living in the neighborhood now (blue collar, young professionals, elderly, or families)?
• Is the house well-suited for the neighborhood?
• How many homes in the neighborhood are currently for sale or facing foreclosure?
• Is the area filled with rental properties or are most homes owner-occupied?
For commercial properties the questions you need to ask are a little different. These are the answers you need to know before you invest in commercial real estate.
• Is the building occupied?
• What percentage of the building is occupied?
• How long are the current leases expected to last?
• Are the current tenants happy with the lease situation?
• What is the business climate like in the area surrounding the property?
• Is this property located in an area of recent growth or it is showing signs of neglect or of a possible downturn?
Find a Partner
The more complicated the investment is the better off you'll be finding a partner to go in with you. Many people don't want to deal with single partners. For those people, it might be worth checking out a group real estate investment opportunity. This is especially wise for first time investors in real estate. It spreads the "buy in" price as well as the risks.
Simple questions like these can reveal a lot about the soundness of a real estate investment. No matter where your interests lie for investment, commercial real estate or residential there are many clues you can use to help you find your way. If you want to get the best return on real estate investment these two clues will help you get off to a great start.
