Real Estate Investing Starts with Research First!

Today, I want to take a moment to give you some insight on our real estate selection process. This article focuses on one of the most important part of buying property. Many novice real estate investors approach buying real estate by trying to find property right from the start. They simply look at the town/city that they live in and start looking in areas that they think is desirable. They spend most of their time and effort analyzing the property and the numbers. However, sophisticated investors approach real estate investing in a different way. In order to achieve long term success in real estate investing, one has to take a top-down approach.

First, the sophisticated investor must identify a geographic area where they want to invest. The area is chosen not based on where they live but based on analysis of economic factors that exist and support that particular market. This means that a lot of time is spent on analyzing things such as economic strength, income growth, investment levels and any other long-term factors that may be driving the prosperity of the area in question. I have found that this type of research takes anywhere from 4-6 weeks to complete.

In order to do this successfully, real estate investors often connect with key stake holder in the area - major employers, city officials and real estate professionals/groups. Based on my personal experience, fifty percent of my time is spent trying to find areas where the economic fundamentals are strong and growing. Throughout my career as a real estate investor, I have accumulated a check list of all the things I study on a specific area. Once I am convinced that this area has long-term potential, then and only then, I try to locate deals. I want to emphasize that this process is one of the main keys to your long-term success in the real estate business. Many novice investors only follow a few criteria when buying real estate – the financial aspect of the deal, tenant profile and the attractiveness of the neighbourhood to potential tenants. Although these are very important, one must not overlook the power of economic fundamentals and the impact on long-term property values. Ultimately, one can find amazing deals in any area, however, it is the economic engine in a particular area that will allow your property value to appreciate over time, and allow you to profit handsomely from your investment. For a example on what kind of positive effects strong economic fundamentals have had on an entire province, refer to the “Real Experts – Alberta Report” document on our website (under the Fundamental Research section).

Stay tuned for future articles on how we approach real estate investing and how we conduct our due diligence on each property we look at. Also, feel free to make comments and share your ideas.