When you're looking at potential deals, there are two very important questions that you must answer before pursuing a deal. Answering these questions will keep you focused on making more money with your investments.
So, think about it? When you're looking at a deal, how do you know if it's a property that you want to pursue? What process do you go through to determine if you like a deal? Well, there are two big questions you must answer before spending any valuable time on a deal.
Last Friday, I was out in the marketplace looking at deals with my new partner – Brad. Brad has been a leading industrial property broker for the past 10 years, and now wants to start building his own wealth buying his own properties.
We are very early in the process, as we just formed a new partner relationship. As we were driving and looking at properties, we saw lots of opportunities. We'd say, “Wow look at that partially vacant deal.” And again, we'd see another deal that had hair on it.
After driving for an hour and looking at properties, we saw lots of properties that peaked our interest. So, how do you narrow down the opportunities? What questions do you need to ask and find answers to before pursuing a deal?
2 Key Questions You Must Ask Yourself As a Real Estate Investor
1. Does this property fit my investment strategy?
Since Value Hounds are specialists', we only pursue deals that fit within our property type, target market and investment strategy. Assuming you are looking at deals that fit your assets class in your targeted area, you should only pursue properties that you have an investing solution for.
Remember, the investment strategy you developed before looking for deals? Potential properties should identify a problem that your investment strategy solves. So, when you are looking at a deal, ask yourself can your investment strategy solve the problem? Your investment strategy (solution to the problem)- is how you make money with the property.
2. How can I add or create value with this property?
When you're looking at a property that fits your investment strategy, you must next assess if the property has value creation potential. Can you buy the property below replacement cost? Can you improve the business operations to raise rents? Can you improve the property with needed capital improvements? Can you reposition the property to a unique tenant group?
Finding answers to these questions, and similar questions, will help you determine the profit potential of a deal. The deals that offer sizeable profit are the deals you will pursue.
So, when you are looking at deals, make sure you have the right answer to these key questions. Does the property fit my investment strategy? How am I going to make money with the property? Once you have answers to these investing questions, you should have a solid footing to know whether or not to dig deep into the opportunity.
I hope this information serves you. I look forward to helping you reach for the stars!