Evaluating Investment Property?

I'm interested to know how you evaluate the profitabilty on an investment property?

Whoever said never buy with borrowed money is nuts. If you can afford to pay cash for all your investments, you wouldn't need them in the first place.

I'm assuming your looking to hold a rental. If you are looking for a rehab, send me an email and I'll give you my method of evaluating those.

Rental properties are only as valuable as the rent they bring in, unless your market is appreciating rapidly. Your profit margin needs to be enough to give you something after your taxes, insurance, utilities, and mortgage are paid, even if your vacant for a short while.

The formula I'm comfortable using is gross rents / .02 = purchase price.

So if the gross rents of a building are $1400, I won't pay more than $70000.

You have to buy the property CHEAP, like almost a steal. You make your money on the buy of the property. Also never ever make a purchase using borrowed money, you will loose on the deal if you do. Pay cash and buy at less than 70% of the appraised value.

Look at the market. See what other people are getting for rent. Lookat what the economic prospects for the area are. Look at how much you can afford. If you are looking at a house, how much can you afford bad tenants...

Hi,

Checkout http://realestateguide.financialdealsonl... for some valuable tips on the matter. Good luck.

I can recommend a book called 'the Jet-to-Let bible' even if you don't want to buy abroad it gives a comprehensive list of what makes for a great area and a great property based time-tested methods of property appraisal.

Whether or not you borrow to purchase the property makes absolutely no difference by the way....

I would recommend reading some books on the subject before you do anything. I am myself right now attempting to learn everything I can about investment real estate. I currently work as a leasing agent for a company that owns tons of investment properties, as well as does plenty of real estate development. This job has helped me learn the property managment side of investment real estate.

However, I am really trying to soak up everything possible about how to evaluate properties. Two books I would recommend are "The Wall Street Journal Guide to Real Estate Investing" and "Investing in Real Estate, 5th Ed." These are two great books that talk about getting involved in, and evaluation income real estate. But these are only the tip of the iceberg.

You can look at online calculators and investment strategies all day long, but unless you really know how the financials of real estate work, you're entering it blindly.

Simply put, just educate yourself to no end....then get involved.