Framework for Real Estate Investment Success


Every real estate investor has gone through the process of getting that first investment opportunity and then running with it to make a profit. While every situation is different and there are probably thousands of examples on initial investment deals, every investor has at least some part of an investment foundation they draw from.

Investment FrameworkFor those that were born into families with a lot of investing experience, that foundation might have been instilled at a young age. For the aggressive investor that begins life in real estate early, perhaps an insatiable thirst for knowledge on the subject provided the basis for success. However, some kind of framework was established in every real estate investor, no matter how informal, and creating your own can be one of the best ways to give yourself a strong chance for investing success.

Create a Process
Having a standard set of steps that you take when reviewing a potential real estate investment opportunity can be a great way to standardize the procedure and give you hard results on the viability of a particular property. Probably chief among the things you want to consider is the rental history of the property. Often, clear trends can be seen over time and if the records on the property have been kept well, you can see what has and what has not affected rent payments over time. This can be a powerful piece of information.Many investors use an Excel spread sheet or special program to keep track of all of the bits of information turned up regarding a particular property. With this level of organization, you can clearly set up different columns for expenses and revenues on the real estate property to quickly get an idea of the viability of the property and what kind of risk level it might have.

Divide into Internal, External Forces
In going through the financial data of a property, you will find that there is an almost endless series of bits of data that you will need to process to get to the bottom of a property’s financial health. Divide and conquer is perhaps the best way to get through all of that information and dividing based on external and internal forces is a good place to start.

Internal data refers to everything that speaks to the expenses and revenues seen by the property. The rental history will fall into this, as well any obligations for utility services, contract services like landscaping or snow removal and taxes that need to be factored into the cash flow on a particular property. As you go through the process, you will able to quickly put these bits of information into your spreadsheet or other software to quickly get a look at the internal financial state of the real estate property.

When looking at external forces, you are more concerned about big picture type ideas, things that will impact the market of the area the property sits in. Are there new developments going up around the property? Has population migrated toward or away from the area? Has the per capita income of the area gone up or down over time?

These are all important questions to ask and while you won’t get hard data on one particular property, you will get a feel for the prospects of the area. This feel will leave you better equipped to gauge the risk level on a particular property and the likelihood that the market might dip in that area. While this will never be an exact science, it must go into the process to give you some background on the property.

As you set out to conquer the world of real estate investing, having a trusty model at your side to put investment opportunities through can save remove some of the hassle and stress from the situation. Whether you are a first-time investor or have a few deals under your belt, standardizing a process and giving yourself the proper investment framework to work from can mean a great deal of difference and hopefully, a great deal of profit.

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