Investors are often easily wowed by the financial characteristics of a prospective investment. However, shiny exciting numbers are fraught with risk. Instead, investors should focus on a few basic characteristics to select and make investments in the real estate markets.
Before we jump into what to look at, a discussion of what to avoid deserves attention. Investment plans that rely on the unproven even for a specific project should be avoided by smaller investors. To be clear, I am not saying that all such plans are bad investments. In fact, many are superior investments. However, for smaller investors (though possibly quite sophisticated, this requires resources and a tolerance for potential loss that many aren’t armed to support. So, to continue, avoid the following:
Investments that are not based on a long standing established revenue and expense profile.
Investments that project new revenue based on changes that are not in place …