Don’t buy investment property until you walk through the building to examine its physical condition. Talk with the existing tenants to get an impression about whether they’ll stay there, paying the rent regularly.
Once you project the net operating income (gross rental income minus operating expenses) a property is likely to generate, set your bid based on this NOI number.
For a warehouse, which probably won’t demand extensive management, you might bid 10 times NOI as a purchase price. On the other hand, a strip mall with many transient tenants will require more time and effort so you might want to keep your bid down to five times NOI.
Mortgage rates today are relatively low so you should borrow as much you can, as long as operating income will cover the debt service. The more you borrow, the greater your profit if the property appreciates.
