Selecting properties is a simple process which can get very complicated quickly, often leaving investors paralyzed in their indecision.  There are many smart people who spent much money on education, looked at dozens if not hundreds of properties and purchased nothing. 

Though we're covering a different topic. Analyzing properties is an important step in the investing process. 

The numbers need to work and they need to work for a particular market.  In a down market where value growth is questionable and rents are under downward pressure and the economy is weak the numbers need to sway heavily to cash flow.  In an up market when everyone has a glimmer of hope in their eyes and real estate is slowly coming back in fashion, cash flow lessens and appreciation kicks in. 

It's not easy to get both at the same time at the initial purchase period and short term there after.  In the long term an investment will be in multiple cycles, though ones purchased with cash flow a property should always increase it's output resulting in a combination of cash flow and appreciation during good times.  It's just the initial period of purchases and the expectation set for the property in the short term (1-3) years. 

When you have found several properties to choose from do the numbers, but take into account other values which cannot be measured in numbers, to decide if a property is for you.

An example can be a really good deal on a fourplex that is half the price of another.  The less expensive property is in an area which is unlikely to improve: some areas simple don't have the supporting environment for growth, but they still have a place in certain portfolios.  This property will needs lots of work, it will even need to be monitored and fenced during the remodeling to make sure no one damages and steels the new cabinets and fixtures and other improvements.  This property will put out a very good high cash flow and return on cash invested. 

The more expensive property will provide a smaller cash on cash return, it needs work, but the area is such that density is increasing, the schools are good and a larger pool or renters exists that can live there.  In the latter you are giving up cash flow for the opportunity of other value growth.

But there are additional intrinsic costs to a property such as the less expensive one above.  There is an "aggravation factor", stress and additional management involved.  Not everyone wants to worry about broken windows or stolen tools.  Some are fine with this for the additional return, are you? 

Are you okay with tenants who pay cash and don't necessarily sign a lease or cannot.  They will pay good rent, but if their job changes they will simply go, no 30 day notices and maybe even no returned keys. 

In the more pricey properties the return is lower but the rental pool, your customer base is different and so is your compensation for these different customers. 

These are the same businesses, but focusing on different clients (tenants) with a different return expectation for the monetary and risk expense necessary to run them. 

When deciding on properties don't just look at the numbers.   You need to know why one property has better numbers then the other and take those characteristic into consideration.  What type of business do you want to run.  What type of property do you want to own and what type of manager do you want to be.  Have these clearly answered to make a truer measurement of your real estate investment choice.

This is somewhat difficult to explain, but I'm sure the more experienced investors understand.

When choosing a Realtor to help you with an investment purchase or sale consider their hands on experience.  We've got it!