What to Look for in an Investment Property: 3 “Pluses” and 3 Things to Avoid

By Ralph Serrano

So, you’re looking for your first investment property. Before you jump into any ill-advised deals, you’d do well to ask yourself if you really know what you’re looking for.

Don’t take that the wrong way. Plenty of first-time real estate investors know exactly what they want. They don’t need anyone to tell them what to look for and what to steer clear of. One way or another, they’ll learn.

Others need more guidance. That’s okay, too. 

 

“It’s better to weigh that first real estate investment decision carefully and make a choice you can live with for the long haul than to make a choice you’ll come to regret.” 

— Ralph Serrano

 

If you find yourself in the latter camp, you’ve come to the right place. Read on for more about three things to look for in an investment property and three things you might want to avoid.

What You (Might) Want to See in an Investment Property

These three things may signify a favorable real estate investment opportunity:

1. A Location That Sells Itself — Or That You Can Work With, Eventually

“Location, location, location” is the lodestar of real estate investing. Nothing commands a premium price like a premium location. If you’re fortunate enough to find an underpriced gem in a self-evidently amazing location, great; you’ve got your target. Otherwise, look to locations poised to be better tomorrow than they are today.

2. Good “Bones”

Surely, you’ve heard the term “good ‘bones’” in this context before. You’re looking for structure and layout that, even if some improvements are required, appeal to prospective buyers and/or renters. 

3. A Clear Path to (Manageable) Improvements

Be wary of potential money pits. If you can’t see yourself completing necessary or desired upgrades within the allotted timeframe or budget, take a pass. You’re about to bite off more than you can chew. 

What (Might) Give You Pause

These three things can complicate a real estate investment:

1. Prior Insurance Claims or Damage

These conditions aren’t automatic dealbreakers, but they certainly warrant further investigation. You need to know whether what you’re seeing, so to speak, is what you’re actually going to get.

2. Wonky Interior Layout

It’s someone’s dream home — just not yours. A few quirks are tolerable; a bizarre format is not.

3. High Property Taxes

Property taxes can vary sharply over short distances; it’s all about what local taxpayers can bear (and what they’re getting in return). Still, for investors, high property taxes mean a property that’s less likely to paper, all other things being equal.

Some Things Are Non-Negotiable

The foregoing notwithstanding, it’s important for real estate investors to understand that some things are truly non-negotiable in real estate investing. Buying a standalone property without a clean title is a big no-no, for instance. So too is committing to a property that needs more work than you can afford. 

At the end of the day, what matters above all else is that you feel comfortable in your decision. If that means passing on an opportunity that another investor sees as a slam dunk, or sticking with an opportunity that everyone thinks you’re crazy for pursuing, so be it. After all, you’re the boss.

Are you planning to invest in real estate, distressed or otherwise? What’s encouraging you to take the leap? What has you pumping the brakes?

 

Ralph Serrano of Miami-based Safe Harbor Equity, is the founder and managing partner.