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…..