We purchase a policy of title insurance when we purchase real estate to discover title problems and to minimize the risk of incomplete title or loss of title.

There are other legal considerations outside of title insurance coverage, however, about the availability, extent, and quality of those rights that a real estate investor must research in the property’s legal description.

1. Compliance with zoning requirements or appropriate usage of the improvements
2. Compliance with setback requirements
3. The presence of easements or other deed restrictions
4. Satisfaction that all prior year’s property taxes and assessments have been paid
5. Satisfaction that improvements subject to conformation to the appropriate building codes or variances have been approved
6. Satisfaction that the current usage of an improvement is legally conforming and will not be subject to termination by strict code enforcement
7. Examination of leaseholds or other rental agreements, and satisfaction that these contracts do not alter the property value or limit the rights of the new investor
8. Satisfaction that there are no historic preservation or scenic easements that might transfer rights that would otherwise remain in the private sector to the general public
9. Adverse environmental impacts-problems like asbestos, formaldehyde, lead contamination, radon gas, leaky underground storage tanks

A real property’s “bundle of rights”, and how they are used, is what gives rise to the value of an investment property; therefore crucial for real estate investors to carefully examine.

Only then, after examination, can the buyer determine a property’s value and decide whether the real estate investing opportunity is really a package worth the investment.

The ability to discover as much information as possible about a rental income property is crucial to making a wise real estate investment decision.

You should never buy blind and assume that a specific income producing property must be good because it looks good; or worse yet, purchase residential or commercial real estate solely because someone tells you it is good.

Prudent real estate investing requires research and a thorough knowledge of the attributes of the investment property.

Here are a couple of suggestions about a property’s site description and improvements worth noting when considering the value of a particular real estate investment property opportunity.

The physical aspects of the property, including a general description, age, and condition of the improvements should be noted.

A site analysis should include the size of the lot, location of site improvements, landscaping and condition of sidewalks, size, adequacy, and condition of parking lots, and other improvements.

The availability of specific utilities like water and sewer, electric, gas, phone, and cable service should be noted.

Basic public infrastructure in the form of police and fire protection, transportation, and highway access should be noted.

The presence of noise or other pollution that may affect the desirability and rent-ability of the property should be noted.

Physical attributes of the improvements like chronological age, size and square footage, number of floors, type and condition of the roof, and exterior and interior walls should be noted.

The level of exterior maintenance, height of ceilings, adequacy and serviceability of water and water lines, waste disposal and sewer lines, electrical service and wiring, gas service, heating, ventilating, and cooling systems, phone service, and cable service, among others should be noted.

Real estate investing requires homework. But as someone said about real estate, “You make your money when you purchase, not when you sell.”

Determining a property’s value up front, before the purchase, is where you want to place the effort to make your money later.

An investment analysis examines economic, financial, and operational data for a specific existing rental property.

Without understanding the investor’s objectives first, however, your investment analysis may not provide the specific value conclusion that the investor needs with regard to meeting that investor’s specific real estate investment criteria.

As a result, your investment analysis presentation might be ignored and leave you wondering why the investor neglected to write an offer immediately.

Keep in mind that a specific investor looking for an investment property has unique investment requirements.

1. Wealth maximization requires consideration of solvency, minimum yield expectations, holding period requirements, tax shelter, or profit maximization at some target risk level.

2. Financial constraints may include the sources and amount of equity, the willingness to incur indebtedness, and the availability of favorable terms of financing.

3. Business considerations may involve limitations on time or physical ability to manage another investment, or might include a constraint that the investment opportunity be located within twenty minutes of other currently-held investments.

Being able to identify your investor’s objectives up front makes it more likely you can assist the investor in meeting those objectives, and ultimately increases the chances that your investment analysis presentation will hit the target.