As the mortgage rates continue to remain low, and many of the current investors leaving the market, new investors are beginning to invest in the market. When buying an investment property you should do your due diligence and run all of your numbers before you buy.

Many investors have their own list of criteria that a property must meet prior to viewing and making an offer. Depending on what type of investment you plan to purchase your list might be longer or shorter. For instance, when an investor is looking to purchase a multifamily home of up to 4 units, they will pick a price range in an area they would like to purchase. With that in mind they begin shopping online to see if there are any properties that meet their criteria. When a potential investment has passed the first hurdle, the second hurdle the investment must pass could be a basic ROI calculation.

Some investors have a set ROI% they would like to meet after expenses. When running the ROI% make certain you use the current real estate tax that is owed and the current or potential rental income, if the property is vacant. If your research reveals a range of rental incomes use the median rental income for that area. After the property has passed this hurdle of due diligence investors will then move to the next step which is a property drive by. You would be surprised how much wear or damage a pretty picture can mask which you may deem undesirable. It depends on the willingness of the investor to put money and sweat equity into an investment. Some of the properties might not make it past this point. The properties that are still in the running and currently have tenants have to now pass the lease agreement test. Make certain you look at the current lease agreements. You would be surprised what you can find or don’t find while looking at the current lease agreements. Make sure you can live with the terms of the current lease agreements.

By now you should have eliminated many of the properties and have a much shorter list. Now it is time to complete a walk through to check the internal condition of the property. When you are not comfortable running your own repair numbers take a contractor with you who can give you an on the spot repair estimate of what it will take to get the property back into shape. Also, don’t forget to call your insurance agent and have them run a CLUE report on the property to find out if it is even insurable.

This is just a short list of due diligence items you should do prior to buying an investment property. Your list of criteria may be shorter or longer depending on what type of property it is and what type of tenants you would like to have.

The bottom line is you should do your due diligence prior to making an offer.

There comes a time that a business is growing and needs more space to accomplish that goal. This could mean that either having to rent or buying bigger space.

Let’s assume you have decided to buy your own building rather to rent another space for several years and you were able to secure financing for your building.

Before you even making and offer there are some things you should think about:

• Location of the current building
• Current zoning of the building
• Is the building ADA compliant?
• Does the building comply with current building codes and zoning regulations for your type of business?

Location:

Is the location suitable for your type of business? When you would like to open a restaurant you should be close to an area that gives you plenty of traffic. Compare too when you are looking to open a trucking company you would need to be closer to an interstate or possible have access to train traffic.

Current zoning of the building:

Is the zoning suitable to your business or would you have to go in front of the planning and zoning board to ask for a zoning variance?

Is the building ADA compliant?

When the building is not ADA compliant you might have to spend extra money to bring the building up to compliance.

Does the building comply with current building codes?

When the usage of the building changes you need to bring the building up to building code compliance and pending how long ago this was done by the past owner. This could take a good sting of money and time before you can move your business into the building.

This is now a true story and hopefully will point out to make sure to cross your T’s and dot your I’s prior to buying a building and moving your business into a building you just bought.

One business owner I know made several costly mistakes as she bought her building to run her business in. The location of the building was a great location but the building she bought was not zoned for her type of business. She moved her business into the new building without getting a zoning variance from the City.

Many months later after she opened for business, the local building inspector came to her and gave her a seize and desist notice, closed her doors and asked her to bring her building up to compliance. At the same time the inspector cited her also for not having her building in ADA compliance and up to the current building code.

She fought the order and she did lose the appeals. She ended up losing her business and she needed to sell the building she recently bought. I have not spoken to her but I only can imagine that she also had attorney’s fees, fines and penalties due to her buildings lack of compliance.

There are other things you should be aware off when buying a building. Being on the planning and zoning board for my city the once I have listed above are ingrained into me and very close to my heart. To be certain all your T’s are crossed and I’s are dotted make sure you hire the proper professionals to help you achieve your goal.

When investing in real estate investors may consider holding properties as rentals for another source of income rather than flipping. Dealing with tenants is a whole other ball game and does need a new skill set and paperwork.

Sure we all are aware that we should run a background and credit check on the tenants, and we do know that we have to have a written, dated and singed lease agreement with them. What we put into the lease agreement is also very important and what we don’t put into the agreement is what will kick us in the chin.

There are many places out there where you can buy pre-written lease agreements. You only have to fill in the blanks and the agreements supposed to have been written for your state specifically or some of them even supposed to cover any State in this Union.

Some investors might take other investors (who already have rental units) lease agreement and just run with it, thinking it should be fine.

How do you know that is agreement is the right one for you and your State? Just because it says so does not mean it is.

I have seen so many lease agreements that left the investor wide open for possible legal issues or the tenants had more rights but less responsibility than the landlord it is not even funny.

To make sure that your lease agreement has you and your property covered is to consult a real estate attorney. Just grab your current lease and let the attorney work it over for you. You maybe be surprised what you are missing and did not cover…..

Not sure if many of us have paid attention but many of the nextgen home buyers have grown up with a huge sense of neighborhood, personal and community balance. They are not at this time in the hustle and bustle of work and life. They are not in the need to look for the next best deal. Some might not finishing high school or college at this time or when they do they are looking to make a difference in their world.

When they are ready to buy most of them are looking for a home and neighborhood that is more environmentally friendly and inclusive. They rather take public transportation, the bike or walk to their destination and when they do own a car most of them park it at home and only used it when they have to.

Looking at our current homes that we own and we can find that 85% to 90% of them might not be as energy efficient as they could be overlooked by the next-gen buyer.

The next-gen buyers in many cases have already adopted a greener and environmentally friendly lifestyle and that is what they are also looking for in a home. Sure it is not cost efficient and feasible to do a total home renovation all at once in many cases to make an older home totally environmentally and energy efficient. Things like that can be accomplished on a small scale, though many little steps.

When you are replacing windows, you night look at more energy efficient window. When the air conditioner or heater needs replacing, you might consider a much more energy efficient unit. Keep in mind, when you are still in the home you, yourself might see a heating and cooling cost savings already.

Not very many of us can pay all cash to purchase our home. Most of us will have to apply for a mortgage to buy our dream home. The mortgage lending industry is a very competitive field even more so with all the recent mortgage rule changes. The bottom line is that mortgage loan officers are still sales people and their main job is to convince you as the consumer to apply with them for a mortgage.

Never be afraid to walk away from a transaction you are not comfortable with or you dread working with the loan officer.

I have been working as a Real Estate Broker now for over 15+ years and after the worst experience with a recent mortgage transaction due to the mortgage company, here are some Ideas to get you started;

• Don’t take the first person that comes in your door.
• Ask someone close to you that has recently closed on a mortgage and find out if they could recommend their lender they have been working with.
• Speak with your financial adviser, accountant, attorney or your REALTOR to help you with a short list of lender referrals.  These people deal with mortgage lenders on a regular basis and can help you filter through the massive amount of information.
• Interview several loan originators and ask them about their experience, time in business, companies they worked for and how long they worked for each company.
• Ask the loan originator for up to 5 referrals to call.
• Call the referrals the mortgage originator gave you !!!

You also can search the internet.

Keep in mind advertising is shiny and you need to pull the curtain back to find the information that is important to a mortgage application like:

• fees,
• lock-in periods
• points and
• qualification requirements

Everybody you speak with will sound like they have the best deal in town. Make sure you ask and receive the Good Faith Estimates (GFE) and Truth-In-Lending (TIL) statements. This way you have everything in black and white and in writing.

No matter who you work with, your mortgage loan will go through the same process. It will be originated, processed, approved and closed by individuals who work for institutions/companies who use software and other platforms that allow them to do their job.

In many states the loan officer now has to be licensed. You as a consumer have every right to check the person or company to make sure they are truly licensed in your state to do business through the Nationwide Mortgage Licensing System & Registry or Nationwide Multistate Licensing System

Last but not the least it is also important to know the difference between mortgage qualification and mortgage approval.