Once you locate your prospective real estate investment, you must analyze it carefully and thoroughly. You must verify all the details about the property, especially the income and expenses the seller shows.

Develop a property analysis with a good real estate investment software solution. It will also serve as a reminder for items you want to know, such as type of units, age of the property, rent breakdown per unit, expense items, lot size, property and location features, and so on.

Analyze the potential real estate investment using the following list of the various phases. If the rental property doesn’t seem to make financial sense after your initial analysis has been made, perhaps altering one or more of these will improve the financial picture and make the property a good real estate investment.

• Income: Can rents be increased, and can they be increased soon after you purchase the property? Is better management needed? Would a change in the type of tenant in the building allow for higher rents? Could the building be used in some other way to increase income, such as small offices, etc?
• Expenses: Take a close look at operating expenses. Are any of them excessive? If they are, will you be able to lower them?
• Financing: Adjust the return on an investment by applying various financing techniques. Perhaps one type of financing package will turn your prospective property into a sound, profitable investment.
• Your overall benefits: Don’t look just at the before-tax cash flow produced by the investment real estate. Consider all four returns you can expect. Determine what your property will give you in the way of a return after taxes. A good real estate investment software solution will make this easy.
• Price: Some properties simply will not make sense unless you can get the seller to accept a lower price. Tweak the price to see its affect on the cash flow and rates of return.

Never make a real estate investment decision based on the aesthetic beauty of the building or by using a simple rule of thumb to determine its value. Remember, “Only women are beautiful.” Take the time to prepare a property analysis. Avoid the rule of thumbs, use sound real estate investment software to help you analyze the real estate investment carefully. This is the only reasonably certain way of making the right investment decision. If your property analysis shows that the property doesn’t make financial sense, forget how pretty it may be and don’t buy it!