There’s no need to get caught up in analysis paralysis when trying to buy an investment property. Finding and buying good properties is a fairly objective business. There are accepted ways of deciding what’s a good property, and what’s not. And what it will all come down to, of course, is the numbers.
If you can clear (on average) $100 in positive cash flow per $10,000 you put down, you're doing fine. For example, if you're putting 20%, or $48,000, down on a $240,000 property, you'd need to clear $480 in positive cash flow (factoring in the possibility of future vacancies) to make the deal worth it. Depending on the area you're buying in, this may be doable, or it may not be.
If you're purchasing a single-family home, even a 30-year mortgage after that large down payment would be over $900 a month. If you can get $1380 to $1500 a month in rent in your area, you should consider the purchase. If not, then don't make the deal!
Good properties are out there
The above example might make it seem more difficult to purchase investment property than it really is. For example—if that property was a duplex and not a single-family home, $900 a month for the mortgage begins to look pretty good, as it's usually easier to rent two duplexes for $1,000 a month than to rent a single space for $1500.
The trick is to keep it simple. Look for properties that will be attractive to tenants; don’t try to predict the direction of the market.
Make sure you focus only on concrete factors when looking to buy investment property—the livability of the home, the neighborhood, local schools and so on. Your job as a real estate investor is to purchase properties you can fill. This means you should try to look for properties that you know will be attractive to tenants, rather than trying to look for properties that you think will appreciate the most in the long term.
You can understand the mind of a renter far better than you will ever understand the machinations of the market!
Buying local takes a lot of the guesswork out of real estate investment—and the guesswork is usually what costs you money. Additionally, when your properties are in proximity to each other, you can save a lot of money thanks to economies of scale. You can sign a single contract with a maintenance company for all your properties, for example, rather than signing a new contract for every property. The cumulative effects can save you hundreds, even thousands a year.
Timebox the amount of research you put into any one property
If you're planning on investing in real estate, you can't get so caught up on researching a single property, or making a single decision, that you allow deals to pass you by because you're not paying attention. This is why you should set hard limits on the amount of time you'll put into deciding on a property. If you've run the numbers, done your due diligence, and you still have lingering uncomfortable doubts about the property, just move on.
It may be your fears were unfounded—but ultimately, who cares? There are other properties out there worth your time. Don't let over-analysis cost you juicy opportunities!
Use a property inspector you trust
Perhaps the best way to take all the guesswork out of the process is to work with a property inspector you trust. Working with a property inspector from the beginning will save you time.
A lot of real estate investors have stories about properties they almost purchased, until they were discovered to have serious problems during inspection. Everyone is grateful to dodge a bullet, of course, but if you get deep into the purchasing process on a property and have to pull out, you will have undoubtedly missed opportunities that would have otherwise been available to you.
Working with a property inspector you trust means you won't waste your precious time. If a property isn't worth it, the inspector will leave no doubt.
Buy with confidence
Real estate investment isn't rocket science. The basic facts are bedrock. You must aim for positive cash flow, which requires keeping your property rented. This means you should only buy properties people will actually want, which is really the only abstract factor to consider. Everything else is cut and dry. Do the numbers add up? Does the property pass inspection? If all these factors are a go, make your move.