1) You can handle the cash flow (if negative). It is ok to buy a property for appreciation if the cash flow is negative. However, you just have to realize that the location of the property gives you that feature. If you can’t handle it, buy something that cash flows more or go buy in a place where the cash flow is positive. There are also locations in the U.S. which have terrific cash flow but their appreciation is actually negative (the rust belt). You can mix and match properties in order to diversify your real estate holdings.
2) Property is economically rented (meaning that the tenants in there are actually paying rent, not just in there to give the illusion of being fully rented).
3) Per unit cost does not exceed $175k (the lower the better!)
4) Not in a bad neighborhood!
5) Timing the market (if you buy at what you perceive to be a good time to buy into the market).
6) Investor capital. If there are a lot of investors buying in the area, avoid! For example, there was a lot of investors buying in Arizona and Florida and they propped up the prices. If I know a huge amount of investors are going there, I tend to stay away from it.
7) YOUR WIFE. You will need to gauge your wife or significant others’ risk tolerance. You do not want to all of a sudden find yourself facing an angry spouse asking “why did you buy this property?”. If you think your wife might find it too risky, either educate her or buy a “safe” real estate investment.
I’m sure there’s more but that’s all I can think of.
