There is a clear distinction between shopping for a property as an investor and as a homeowner.
As an investment property, you may be looking at properties that need lots of work or may have smells that you would avoid as a potential homebuyer. Recently, an investor I met, said “the smell of poo is the smell of money”. While that is gross, it is also true! As an investor, the worst shape the property is in, the better the deal you will get. Remember the money is in the buy!
On the other hand as a homebuyer, in most cases you are looking for a turn-key property and one that you can call home for years to come.
I wish I had kept this in mind, when I was shopping for my first rental property. I was looking for a property that was turn-key and thus paid top dollar for that property. Had I known this as first-time investor, I would have made money in the buy instead of losing. I was so hell-bent on finding a property that I did not keep these things in mind. Last time I made that mistake.
So with that in mind, as an investor here are some key things to keep in mind when shopping for a property.
LEAVE YOUR EMOTIONS AT HOME – As an investor, you are not looking at properties with your homebuyer eyes so don’t bring your emotions along. Leave them in check. Remember you are not buying for aesthetics. You’re buying for cash flow!
MAKE A LIST – When shopping for a property, make sure you have a list. For instance, you are marketing to families so you would need at least 3 bedrooms and 1 bath so don’t settle for 2 bedrooms and 1 bathroom as your marketing just went out the window. Similarly, if you are marketing a mutli-family home, you might have on your list separate water meters, so don’t disregard this as it could cost you more to have that inserted after – thereby reducing your available cash flow.
AREAS TO BUY – Just because every investor is in that area, does not mean you should be buying there. Do your own market research. For instance, are you a flipper? You need to know your numbers as well as market demand. There was an investor, who was experienced in other areas of real estate, but not as a flipper and bought a property in a part of Burlington that was not appreciating as quickly and unfortunately he ended up holding this property as a buy & hold as he would be losing money on the flip. Furthermore, the market demand in this area was to renters and not buyers and thus flipping the property was not possible.
DON’T SETTLE – I understand it is a seller’s market, which means that supply is low, however there are many opportunities to find an investment property. If the one you found, does not fit all of your parameters keep going, don’t settle!
ANALYZE – Investment property shopping can be exhausting. Most successful investors will analyze up to 100 deals a month, before they find 1 good deal. Not only does this differ from home shopping but it also teaches people how to look at a property unemotionally and detached, while analyzing for cash flow – remember cash is king when it comes to property shopping!
So the next time you go property shopping – remember it’s not the same as home shopping. Use these tips and you may find a great deal!