thePrivateMarket.com

One of the ways that I evaluate the level of sophistication of fellow real estate investors, and potential clients, is the answer to this question:  “What is your acquisition criteria?”   More often than not, the answer is “I just want a good deal,”  which is usually a sign of a novice investor.  Experienced investors know exactly what they are looking for, and can explain how and why that criteria fits into their overall investment strategy.  If your new client is a novice investor, the best place to start is working together to establish an acquisition criteria.

The following is an example of an investor criteria that I use as a starting point for discussion.   I work with clients to modify it to create and then meet their goals.  This process helps me serve them better and saves lots of time for everyone during the search and acquisition phase. 

Example Single Family Rental Acquisition Criteria:

• 3 bed / 2 bath  minimum (or 2 bed / 1 bath w/ full basement)
• Brick or modern frame
• Ranch or two story structure
• Finished  or open basement
• Minimum 1 car garage, preferably 2 car
• Above average street scene, especially next door neighbors
• $50k – 150k purchase price
• $120k – 250k ARV (after repaired value)
• $10k – 40k rehab costs

Exceptions and Other considerations:

• Will buy 2/1’s but it must have either a basement or a garage.  Without either, no deal.
• All houses should be larger than 800 square feet on main level
• Will buy frame houses must be newer than 1975
• Prefer ranch style, will buy bi-level, two story, story & 1/2 but don’t like tri-level

Deal breakers:

• Nothing directly on / or within a block of / or backing to a major street
• Nothing within 2 blocks of a highway
• Nothing immediately next to / or within direct view of commercial/industrial, grocery store or muffler shop, etc.
• Nothing older than 1920 (see related post titled “Why I will Never Buy Another Victorian”
• Nothing with a functionally obsolete layout (tiny bedrooms, no closets, only bathroom off the kitchen, etc.)

Will pay a premium for properties that:

• Need less than 20k rehab
• Next to park or green space
• Larger lots zoned R2

Proper planning for an overall objective in your real estate investments is a critical step toward realizing goals.  Determining an Acquisition Criteria is just one of those steps.   Without this process, it is too easy to become emotional about deals, properties and opportunities.  “Failing to plan is a planning to fail” is so true in this business.  Happy Investing.