Before You Invest in Rental Real Estate

It's easy to get thrown off by the appearance of a property, your emotions, or what the media is saying. Here are four ways to avoid making that mistake:

Reality Check One: Who is Your Target Market?

If the property is a good fit for your target market, it doesn't matter if you wouldn't live there. A renter may cherish the property.

Reality Check Two: Are You Emotionally Involved?

Emotions shouldn't be involved in buying a rental property, but it's something to be wary of. If, at any point in the negotiations, you feel you can't walk away from the deal, you need to take a step back and review everything! When your emotions are involved, you can't make rational decisions.

Reality Check Three: Are the Numbers Really What They Say They Are?

The numbers might look good on paper, but will the rent cover all the expenses? Make sure the numbers are what the sellers say they are. Get copies of any leases to verify rents. Check market rental rates for the area to make sure the current tenants aren't under or overpaying. And make sure you obtain copies of the bills you'll be responsible for (taxes, utilities, insurance, etc.).

Reality Check Four: Are You Judging the Book by Its Cover?

Many opportunities are missed because a property makes a negative first impression. The best deals are often those that look rough but can be easily rehabbed. Some properties may need a major facelift to maximize its potential - but don't judge a property strictly on its looks or you may miss out on a deal that could pay off big in the long run.