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Step 1
Determine the sale price of comparable properties that were recently sold in the neighborhood. This will give an investor an idea of the market of the property. The most complete comparable sale information is available through any local real estate agent.
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Step 2
Ascertain the desirability of the property's neighborhood. Many issues factor into this comparison, including new construction, schools, crime rate and tax rates. The intangible value of the property will be greater if these issues are favorable.
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Step 3
Establish the amount of work that needs to be done to make the property up-to-date. Some properties will need almost no upgrading, but these properties cost market value or above. Typically, the best investment properties will need some work. An investor must determine if the labor and cost are feasible for a return on investment perspective.
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Step 4
Institute a comparable investment time frame for each property. Determine what type of investment each property is. One property may be better suited for a buy-and-hold strategy while another property may be better suited for a renovate-and-sell strategy.
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Step 5
Conclude what all of the cost factors are for each property and make a final decision. Factor in intangibles and tangibles to find the total investment potential for each property. After looking at the big picture from a cost-benefit perspective, an investor can make a prudent monetary decision.
