Realty411 Featuring Jimmy Reed, 1REClub.com | Page 50

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Diligence and the Property
When it comes to the property , bear in mind that the promoter will be presenting it in its best light . Here are the primary items that need to be investigated :
1 ) Age : Nothing older than age 30­35 should be considered . Syndications intended to add value to deficient older properties usually turn out poorly due to excessive rehab costs .
2 ) Building Class : A = Luxury , B = Professional , C = Working Class (“ Blue Collar ”), D = Low Income (“ War Zone ”). Luxury apartments don ’ t cash flow as well , and low income units are , frankly , treacherous . Stick with class B or C .
3 ) Pictures : Hire a service such as wegolook . com to take pictures of the property and its surroundings , or go to Google View , or Bing Street View . Properties need to be fairly clean­looking . No industrial properties or strip centers close by . Schools , a hospital , and houses of worship are a plus . You probably know “ nice ” when you see it . Tenants do , too !
6 ) Unit Mix : The Offering Circular from the promoter will normally say how many units are studios , 1­bedroom , 2­bedroom , and so on . Avoid projects that are largely studios and ones because turnover is higher , and so are related costs .
7 ) Project Plan : Also in the Offering Circular there is usually the promoter ’ s plan for the project to add value by remodeling , adding amenities , raising rents , and so on . Consider this carefully because all of the projected returns from the promoter depend on the plan succeeding .
8 ) Rents : Go to zilpy . com and accurent . com to check out the rents given presently and projected by the promoter . If not satisfied , feel free to call the property manager to discuss them . Don ’ t be shy . Your investment is at stake .
9 ) Market Conditions : Oftentimes these are discussed in the Offering Circular . There is no formula for evaluating this , but see if they make sense to you .
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4 ) Crime Rate : Go to ciity . data . com and check out the neighborhood crime rate . While you are there , check out the school ratings and the household income . Renters are attracted to low crime areas with good schools , and you need that to keep your building full .
5 ) Unemployment Rate : Go to the Bureau of Labor Statistics website , BLS . gov and check this out . It shouldn ’ t be more than 20 % above the national average at the most .
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