Real Estate Investor's Checklist

by Irwin, Robert

• ISBN13: 9780071456463
• ISBN10: 0071456465
• Edition: 1st
• Format: Paperback
• Copyright: 2006-01-11
• Publisher: McGraw-Hill Education

Summary

Robert Irwin is America's #1 Real Estate author, with millions of real estate books in print. His successful "checklist" series includes Home Buyer's Checklist, Home Seller's Checklist, Home Closing Checklist, and Home Renovation Checklist. Irwin's How to Get Started in Real Estate Investing (McGraw-Hill, 2000) has sold more than 80,000 copies For real estate investors at every level, Real Estate Investor's Checklist is an all-encompassing evaluation tool to help real estate investors guarantee the profitability of prospective investment properties Provides need-to-know information for every aspect of the investment, from finding the right properties to property management to timing a sale Covers single-family homes, apartment buildings, office space, small commercial properties, and bare land opportunities

Author Biography

Robert Irwin is one of America's foremost experts in successful real estate investing. He is the author of McGraw-Hill's Tips & Traps series, as well as The Homebuyer's Checklist, How to Get Started in Real Estate Investing, and How to Invest in Real Estate with Little or No Money Down.

Table of Contents

Preface	xv
How Will You Make Your Profit?	1	(7)
Questions to Ask Yourself
Can the property be put to a higher, better, and more profitable use?	1	(1)
Can the property be split?	2	(1)
Can the property be flipped?	2	(1)
Can the property be held?	3	(1)
Can the home be ``scraped''?	3	(1)
Can rents be raised?	4	(1)
Are there any lease advantages (or restrictions)?	5	(1)
Can the security deposits be an advantage?	5	(1)
Can I get a better price because of poor condition?	6	(1)
Can I get a better price because of poor location?	6	(1)
Can I buy with little or no cash?	7	(1)
What Do You Need to Get Started?	8	(5)
Questions to Ask Yourself
How much cash do I need?	8	(1)
Where can I get the money?	8	(1)
What's my ability to get financing?	9	(1)
Will I have the time to devote to real estate investing?	10	(1)
Do I have a team?	10	(1)
Do I have the right mindset?	11	(1)
Do I have the right personality type?	12	(1)
Did You Evaluate the Market before Entering?	13	(10)
Questions to Ask Yourself
Is now a good time to invest in real estate?	13	(1)
Is it a good time to flip properties?	13	(1)
Are sellers motivated to take lowball offers?	14	(1)
Am I competing with many other investors?	14	(1)
Can I afford to get into the local market?	15	(1)
Are rents high enough to buy and hold?	15	(1)
Questions to Research
Where are we in the real estate cycle?	16	(1)
How are the state and local economies doing with jobs?	16	(1)
What is the local supply/demand for housing?	17	(1)
Are there many REOs in the market?	17	(1)
Are many sellers ``upside down''?	18	(1)
Are there many FSBOs in the market?	18	(1)
Questions to Ask an Agent
How big an inventory of unsold homes is there?	19	(1)
What's the time needed to sell the average home?	20	(1)
Are there many repos in the market?	20	(1)
Are there multiple offers on homes?	21	(1)
Are sellers cutting their prices?	22	(1)
In which direction are interest rates going?	22	(1)
Did You Check the Neighborhood before Making an Offer?	23	(11)
Questions to Ask Yourself
Is it a good location?	23	(1)
Is it close to home?	23	(1)
Am I comfortable going there to collect rent?	24	(1)
What is the ``graffiti index''?	24	(1)
What is the mix of tenants to owners?	25	(1)
Are all the homes and landscaping kept up?	26	(1)
Would I be willing to live in it?	26	(1)
Questions to Ask Authorities
Is there strong local job growth?	27	(1)
What is the crime rate on the street?	28	(1)
What are the test scores in local schools?	28	(1)
Is this a redevelopment area?	29	(1)
What new developments are in the planning stages?	29	(1)
Questions to Ask an Agent
What is the mix of tenants to owners?	30	(1)
Is it considered a ``desirable community''?	31	(1)
Is it part of your ``farm''?	31	(1)
Is there a homeowners' association?	32	(1)
What is the income level of most tenants?	32	(2)
Will the Property Make a Suitable Rental?	34	(5)
Questions to Ask Yourself
Are you ready to start in residential real estate?	34	(1)
Is the home too big/too small for tenants?	34	(1)
Is the home too old to be a rental?	35	(1)
Does the rental fit the job base?	36	(1)
Is the lot too large?	36	(1)
Does it have a pool or spa?	37	(1)
Is it close to my home?	38	(1)
What's the Condition of the Property?	39	(21)
Questions to Ask Yourself
Do I understand how condition affects value?	39	(1)
Can I inspect the property myself?	40	(1)
Should I have a professional inspection?	40	(1)
Is there any plumbing distress?	41	(1)
Is the electrical system in good shape?	41	(2)
Does the roof leak?	43	(1)
Are any appliances worn out?	43	(1)
Do I need to remodel kitchen or bath?	44	(1)
Are there any cracks in the foundation?	45	(1)
Is there any water damage?	46	(1)
Is there insulation?	47	(1)
Is there lead paint?	48	(1)
Are there asbestos hazards?	48	(1)
Is there any black mold?	49	(1)
Does the furnace work?	50	(1)
Is there hot water?	50	(1)
Does the air conditioning work?	51	(1)
Is there a temperature/relief valve on the water heater?	51	(1)
Is the water heater strapped?	52	(1)
Are there any nonpermitted additions?	52	(1)
Are there any odors?	53	(1)
Are there any ``bad'' neighbors?	53	(1)
Do I have all previous and current reports?	54	(1)
Questions to Ask a Professional Inspector
Can I accompany you on the inspection?	54	(1)
Is the roof in good shape?	55	(1)
How's the foundation?	56	(1)
How's the structure?	56	(1)
What's the condition of the soil/water?	57	(1)
Are there any problems with the home's systems?	57	(1)
Are there any mold problems?	58	(1)
How's the well?	58	(1)
Are there any environmental hazards?	59	(1)
Are there other problems I should know about?	59	(1)
Do You Know the Property's True Value?	60	(12)
Questions to Ask Yourself
Are there comps?	60	(1)
Are the comps recent?	61	(1)
Have I forward priced the comps?	61	(1)
Are the comps truly similar?	62	(1)
Can I rely on the comp price?	62	(1)
What is the GIM (gross income multiplier)?	63	(1)
What is the capitalization of the net income?	64	(1)
What is the square foot price?	64	(1)
What is the front foot price?	65	(1)
What is the replacement value?	65	(1)
What is the unit price?	66	(1)
What is the ``fixer-upper'' price?	66	(1)
What price do the leases warrant?	67	(2)
Should I get a professional appraisal?	69	(1)
Questions to Ask an Appraiser
What is the best method to evaluate this property?	69	(1)
What is the quality of the comps?	70	(1)
Will you physically examine the property yourself?	71	(1)
Have You Calculated Transaction Costs?	72	(12)
Questions to Ask Yourself
Do I understand transaction costs?	72	(1)
What are the transaction costs when purchasing?	72	(2)
What are the transaction costs when selling?	74	(1)
Can I get the sellers to pay some of my costs?	75	(1)
Will the buyer pay some of my costs?	75	(1)
Will the agent cut the commission?	76	(1)
Can I insist that the agent cut the commission?	76	(1)
Will the lender reduce its costs?	77	(1)
Will the lender finance some costs?	78	(1)
Can I save on costs by getting a real estate license?	78	(1)
Will the title company cut its costs?	79	(1)
Will the escrow company cut its costs?	80	(1)
Questions to Ask Others
Is the commission rate negotiable?	80	(1)
How much are the closing costs?	80	(1)
How much will title insurance cost?	81	(1)
How much will the escrow fee be?	81	(1)
Can I reduce the points for a higher interest rate?	82	(1)
Can I roll the closing costs into the financing?	82	(1)
Can I get a reappraisal?	83	(1)
Can we renegotiate the price?	83	(1)
Where Do You Find Good Investment Homes and Properties?	84	(10)
Questions to Ask Yourself
Have I checked the Internet?	84	(1)
Have I contacted an agent about local listings?	84	(1)
Have I worked the ``stale'' listings?	85	(1)
Have I looked for price reductions?	86	(1)
Have I done ``drive throughs''?	86	(1)
Have I considered buying a foreclosure?	87	(1)
Have I looked at REOs?	87	(1)
How do I find REOs?	88	(1)
Have I looked at HUD repos?	88	(1)
How do I make HUD an offer?	88	(1)
Can I invest/buy from HUD?	89	(1)
Have I looked at VA repos?	90	(1)
How do I, as an investor, purchase a VA repo?	90	(1)
Am I ready to fix up a VA repo?	90	(1)
Have I checked out Fannie Mae properties?	91	(1)
How do I handle a Fannie Mae purchase?	91	(1)
Have I checked out Freddie Mac properties?	92	(1)
Have I checked out other government programs?	92	(2)
Do You Have a Good Agent?	94	(11)
Questions to Ask Yourself
How do I find an ``investor's agent''?	94	(1)
Is my agent experienced?	94	(1)
How do I avoid the wrong agent?	95	(1)
What does the ``right'' agent's profile look like?	95	(2)
Where should I look for the ``right'' agent?	97	(1)
How do I interview the agent?	97	(1)
Should I work with one agent or several?	98	(1)
Can I ask an agent to cut the commission?	99	(1)
Should I work with a ``buyer's agent''?	99	(1)
Do I have to pay the buyer's agent?	100	(1)
Do I want to work with discount agents?	100	(1)
Questions to Ask Your Agent
What is your specialty?	101	(1)
How long have you worked in real estate as an agent?	101	(1)
How do you feel about other agents in your field?	102	(1)
How many properties do you own?	102	(1)
How often do you come across good deals?	103	(1)
Do you have an investment group?	103	(1)
Is it your policy to buy first for yourself?	104	(1)
Is It a True Fixer-Upper?	105	(8)
Questions to Ask Yourself
Is it really a fixer-upper?	105	(1)
Why do I want a fixer-upper?	105	(1)
Will I need to live in the fixer-upper?	106	(1)
Can I do the work myself?	106	(1)
Do I know the three rules for success with fixer-uppers?	107	(1)
Do I understand how to buy property low?	108	(1)
Have I compensated for a future price?	109	(1)
Can I cut fixing costs?	109	(1)
Do I have a realistic timeline?	110	(1)
Questions to Ask the Seller
Will you accept a realistic offer?	110	(1)
Will you co-fix-up with me?	111	(1)
Have you disclosed all the problems with the property?	111	(2)
Do You Know What's Involved in Being a Landlord?	113	(15)
Questions to Ask Yourself
What is a good tenant?	113	(1)
Should I use a rental application?	113	(1)
Should I actually call previous landlords?	114	(1)
Should I actually call the tenant's current employer?	114	(1)
Can I handle rentals by myself?	114	(1)
Do I understand fair housing laws?	115	(1)
Do I have to give the tenant disclosures?	116	(1)
Do I need to provide smoke detectors in rentals?	116	(1)
Where can I get a rental agreement?	116	(1)
How much rent can I charge?	117	(1)
When can I raise rents?	117	(1)
Should I raise an existing tenant's rent?	118	(1)
How big a deposit should I demand?	118	(1)
What should I do to prepare a property for tenants?	119	(1)
Should I pay for utilities?	119	(1)
Should I restrict pets?	120	(1)
Can I restrict pets?	121	(1)
Should I get a lease?	121	(1)
Should I use a month-to-month tenancy arrangement?	122	(1)
How do I keep my good tenants?	122	(1)
What should I do when there's a repair problem?	122	(1)
What should I do about late rent?	123	(1)
What if a tenant refuses to pay me a late penalty?	123	(1)
How do I evict a tenant?	124	(1)
What should I do about a tenant who destroys or changes things?	124	(1)
How often should I check up on my property?	124	(1)
Should I hire a property management firm?	125	(1)
Questions to Ask Tenants
Can I contact your previous landlord and do a credit check?	125	(1)
How many pets do you have?	125	(1)
Do you have a waterbed?	126	(1)
How soon will you be able to move in?	126	(1)
How many people will occupy the property?	126	(1)
How many cars do you own?	127	(1)
Can you pay in cash all the money owed before you move in?	127	(1)
Have You Lined Up Your Financing?	128	(7)
Questions to Ask Yourself
Are investor mortgages available?	128	(1)
Do I understand why lenders don't favor investors?	128	(1)
What if I'm an investor with lots of property?	129	(1)
Where do I get investor financing?	129	(1)
Can I get an occupant's mortgage?	129	(1)
Do I really have to move in?	129	(1)
Will the seller finance my purchase?	130	(1)
How do I arrange seller financing?	130	(1)
How do I get cash out?	131	(1)
Can I get a second mortgage?	131	(1)
Can I get financing based on my other assets?	131	(1)
Can I get relatives to help out?	132	(1)
Credit Card Financing
Questions to Ask a Lender
Can you get me investor financing?	133	(1)
Can you tell me how big a mortgage I can get?	133	(1)
Questions to Ask a Seller
Will you carry back paper?	133	(1)
How much equity do you have in the property?	134	(1)
What terms will you accept?	134	(1)
Flip versus Serial Investing?	135	(9)
Questions to Ask Yourself
Am I in for the long haul?	135	(1)
Do I really understand flipping?	135	(1)
Do I understand the dangers of flipping?	136	(1)
What are my transaction costs?	136	(1)
Can I avoid transaction costs when flipping?	136	(1)
Should I do an ``option flip''?	137	(1)
Do I have to pay taxes on the option profit?	137	(1)
Do I understand the time problem with options?	138	(1)
Do I need a ``rebuyer''?	138	(1)
Should I do an ``assignment flip''?	138	(1)
How quickly can I do an assignment?	139	(1)
Do I actually have to buy the property in an assignment?	139	(1)
Can I protect myself?	139	(1)
Should I disclose my profits?	139	(1)
Am I aware of the publicity regarding bad flips?	140	(1)
Can I flip brand new properties?	140	(1)
Do I really understand serial investing?	141	(1)
Do I know the drawbacks of serial real estate investing?	141	(1)
Can I take advantage of the financing benefits?	142	(1)
How long must I live in the property before converting?	142	(1)
Can I convert back?	143	(1)
Can I do a tax-deferred exchange?	143	(1)
Where Are the Profits in Foreclosures?	144	(8)
Questions to Ask Yourself
Do I understand foreclosures?	144	(1)
Do I know the three times during the foreclosure process that I can buy a foreclosure?	144	(1)
Am I aware of the dangers of buying a foreclosure?	145	(1)
Do I know the special perils of buying ``default'' foreclosures?	146	(1)
Do I understand ``buyer's redemption'' rights?	146	(1)
Where can I learn about properties in foreclosure?	146	(1)
Do I understand the advantages of REOs?	147	(1)
Why don't lenders promote sales of REOs?	147	(1)
Do I understand the opportunities in REOs?	148	(1)
Do I know the problems with REOs?	148	(1)
How do I get lenders to offer me ``raw'' REOs?	149	(1)
Do I have to pay cash for a REO?	149	(1)
Should I try tax sales?	150	(1)
Should I bid on probate properties?	150	(2)
Ready to Try Office and Commercial Buildings?	152	(6)
Questions to Ask Yourself
Am I ready to move into commercial real estate?	152	(1)
Do I understand the new dynamics?	152	(1)
Do I understand the relationship between rents and price?	153	(1)
Do I understand leases?	153	(1)
Should I start with a small apartment building?	154	(1)
Do I know how I will get financing?	154	(1)
Can I buy for nothing down?	154	(1)
Have I verified the tenants?	155	(1)
Should I get into small commercial buildings?	155	(1)
Should I work with agents?	156	(1)
Should I consider office buildings?	156	(2)
Should You Get Started in Bare Land?	158	(7)
Questions to Ask Yourself
Do I understand what bare land investing involves?	158	(1)
Is it hard to buy?	158	(1)
Where do I find bare land?	159	(1)
Do I know the pros and cons of bare land investing?	159	(1)
Should I look for ``leftover'' lots?	159	(1)
Are there special costs in developing ``leftover'' lots?	160	(1)
Is the lot ``developable''?	160	(1)
Should I consider a ``scraper''?	160	(1)
Can I do a land split?	161	(1)
Should I try an agricultural land split?	161	(1)
Can I change the use?	162	(1)
What about rural/recreational lots?	162	(1)
Do I understand rural sewerage systems?	163	(1)
Am I aware of the potential problems with septic systems?	163	(1)
Have I checked the property lines?	164	(1)
Will building costs be higher in rural areas?	164	(1)
Do You Understand the Investor's Tax Angles?	165	(9)
Questions to Ask Yourself
Do I understand the nature of tax advice?	165	(1)
Do I understand profit and loss from a tax perspective?	165	(1)
When do I owe taxes?	165	(1)
Can I avoid taxes by trading my investment property?	166	(1)
Is a Section 1031(a)(3) tax-deferred exchange complicated?	166	(1)
What is the tax exclusion I've heard so much about?	167	(1)
Can I convert an investment property to a residence and then take the exclusion?	167	(1)
What is the problem with a conversion and a tax-deferred exchange?	167	(1)
How do I calculate my capital gain when I sell?	168	(1)
Can I depreciate my investment property?	168	(1)
Do I write off depreciation?	169	(1)
Do I write depreciation off against my other income?	169	(1)
If my rental property shows a loss, can I deduct that loss from my personal income?	169	(1)
Why must I participate in management?	170	(1)
What if I hire a property management firm?	171	(1)
What is the tax basis of my property?	171	(1)
How does depreciation reduce the tax basis of my property?	171	(1)
How important is record keeping to me?	172	(1)
What if I refinance?	172	(1)
Should I become a ``dealer in real estate''?	173	(1)
Where should I go to get more information?	173	(1)
Investor's Q&A Checklist	174	(9)
Questions to Ask Yourself
Do I understand the principle of leverage?	174	(1)
Can I distinguish an ``alligator'' from a ``cash cow''?	175	(1)
Are condo conversions a good opportunity?	176	(1)
Can I escape in a down market?	176	(1)
Should I use lease options?	177	(1)
What about using a land contract of sale?	178	(1)
Should I form an LLC when I invest?	179	(1)
Do I fully know my sources of investment cash?	180	(2)
Do I have the right temperament to be a real estate investor?	182	(1)
Index	183