How to Evaluate Real Estate Investments

How to Evaluate a Real Estate Investment

The concept of acquiring rental properties as a means to build passive income has become exceptionally popular recently.  In fact, it’s difficult to peruse the internet for content on personal finance without bumping into videos/podcasts/blogs/courses on how to build passive income through real estate investing.

My take on real estate investing is that it can indeed be a wonderful complement to your investment portfolio.  But the conditions need to be just right.  And given how quickly housing prices have risen since the depths of the financial crisis in 2009, the circumstances today are rarely compelling.

As you can imagine, this is a conversation I have with clients frequently.  Some have an existing property we need to evaluate.  Others fall in love with the idea of putting in sweat equity now & building an empire of properties that kick off income over time.  This sounds nice in theory, but in my experience rarely pencils out.  (At least of the opportunities I’ve seen recently in California & Oregon).

This post will explore how to evaluate real estate investing opportunities.  We’ll cover cash flow, return on investment, and go through a real life scenario of a property I pulled from Zillow.com.

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