Eight Ways To Determine If A Property Is A Good Real Estate Deal


Opinions expressed by Forbes Contributors are their own.

1. Check For Zoning Issues And Liens

Generally speaking, one way to tell is when a property has a characteristic or complication that leads to an automatic “no” for the majority of investors. Zoning issues and liens on smaller non-institutional grade property are a sweet spot. These properties are too expensive for retail DIYs but not enough meat for institutions. – Colin Bogar, Property Passbook

2. Follow The 1% Rule

There are many ways to evaluate investment returns when purchasing an income property. As a general rule of thumb, I always advise my clients to use the 1% rule as an investment strategy. The 1% rule states that the income property should rent for at least 1% of the purchase price to yield positive cash flow. The due diligence would be analyzing the fair market rental rates in the area. – Alex Chieng, A & L Real Estate Team

3. Let Go Of The HGTV Hype

In order to score a great deal on a property, buyers need to forget the HGTV hype and let go of lofty expectations. Buy the “worst” place on the block and slowly renovate as your budget allows. Formica and old appliances won’t kill you, and the there is a lot to be said for the value of location over the perceived value of something as easily replaceable as countertops. – Elizabeth Ann Stribling-Kivlan, Stribling.com

4. Check The Cap Rate

Cap rate (i.e., the price/earnings ratio) vs. the neighborhood is one such signal, although sometimes there are legitimate reasons for some sellers to be more motivated than others. We’ve also found price per square foot or price per door vs. neighborhood comps to be important metrics, when used properly. Successive price drops can also signal a good buying opportunity. – Larry Solomon, TheGuarantors

5. Look At The Roofline

Look at the roofline. This is a trick taught to me by a well-known home inspector, Dylan Chalk, author of The Confident House Hunter: A Home Inspector’s Tips for Finding Your Perfect House. Dylan has done structural inspections on about 5,000 homes. It’s the first thing he looks at. It can tell you if the house looks sturdy, complicated, simple, elegant, vulnerable or weak. Is it original or has it been added to? Will it drain properly? Rooflines reveal. – Kevin Hawkins, WAV Group, Inc.