There are three basic analyses that become a part of any Real Estate Investment evaluation and each is just as important as the other. Those three primary focus points are physical condition of the property, title and ownership issues and cash flow potential or profit on sale.

There are other important three things evaluating rental propertyfactors but perhaps these three can knock any potential investment candidate off the list.

The physical condition is evaluated by a professional property inspector and a contractor. This inspection goes way beyond just flipping switches and running the dishwasher. A proper inspection of a 3,000 square foot property should take approximately 3-4 hours and of course the older the home the longer an inspection may take. The inspector as well as a contractor can spot potential issues and when found determine how much the repairs would cost and if the investment is worth the effort. Many real estate investors properly order two independent inspections then compare the two.

The condition of ownership is evidenced by a title report. The title report will show an historical change of title as well as any existing liens that must be satisfied. Common liens that are easily released at the closing table are first and second mortgages. Other liens that must be settled before a property can be transferred from seller to buy are delinquent income taxes, property taxes and delinquent spousal or child support payments. Regardless of the character of the buyer, certain liens absolutely must be settled or the purchase cannot take place.

Finally, a thorough turnkey analysis evaluates the purchase price, long term financing, property appreciation and market rent for the area to determine if the property will indeed cash flow based upon objective, empirical data. Again, there are other factors that will come into play when evaluating a potential investment but none may be more important than these three—physical condition, title and cash flow.