Location

• Neighborhood - This may differ based on your preference, but if you are going to invest in a metropolitan area, choose a large one.
• Amenities - Amenities, such as the proximity to high paying jobs, quality schools, multiple shops, and decent hospitals also impact property values. 
• Infrastructure & Utilities - The availability of lower-cost energy and water sources, high-speed data access, and a developed infrastructure also influence location choice. 
• Transportation & Access - According to recent survey real estate leaders from around the world rate infrastructure quality as the top factor influencing real estate investment. 
• Noise and Smells - Noise influences real estate prices, and possibly a lot more. 
• Government and Courts - Pay special attention to the state and city courts. Check favorability to landlords and real estate investors and the amount of liability as a landlord?

Demographics 

• Crime Risk - Local crime rates can be easily overlooked by investors, even though they impact risk exposure, real estate values, and investment and insurance rates.
• High-Paying Jobs - As an investor, you want to take a good look at the employment and income trends in and around the location you have targeted for investment.
• Age and Spending Habits - Thus, age (44) demographics can be a good indicator of a viable market, especially if you are interested in flipping an investment property.
• Population Growth - Typically, population growth is a result of other favorable factors, such as a low unemployment rate, an affordable cost of living, entrepreneurship, and access to a wide range of industries, to name a few I.e.. DFW.
• Ratio of Tenants vs. Owners - If you are looking for income property, rental-oriented areas are naturally the best fit. But if you want to fix and flip, the same area will make it harder to sell.
• Community - If you are investing in multifamily apartments, a community of many young families will give you a much better outlook and return on investment.

Key Market

• Price-to-Rent Ratio -For rental buy and hold investments in particular, the primary factor the price-to-rent ratio.
• Price - However, as an investor you may be limited by the amount of capital you have available, so price is a deciding factor.
• Cash Flow - This is one of the most critical market factors. If there is no potential to generate cash flow, there is no point in investing.
• Appreciation Potential - A top challenge of real estate investors everywhere is mitigating the risk and uncertainty in both known and unknown neighborhoods and markets.
• Age of Property - The older the property, the higher the maintenance costs.
• Industry - If you buy real estate in a market that has only one major industry, your investment is at much higher risk.

Property Risk

• Construction Style and Quality - Custom-built new homes may be on par with older homes in terms of quality
• Climate, Geology and Position - Humidity, temperature extremes, and storms accelerate the aging process, making property “wear and tear” more likely. Position matters too. A house on the top of a hill or with a steep driveway is much harder to sell.
• Renovations and Additions - Previously made renovations can hide many problems with the property. Know what’s been added and renovated and always make sure all structures on the property are legal structures.
• Foundation or Structural Problems - Fixing foundation problems can be costly and inconvenient. Signs include visible wall cracks that grow over time, cracked tile or concrete floors, doors that jam or fail to latch, persistently stuck windows, and floors that are clearly off-level.
• Roof Problems - Problems stemming from a compromised roof can cost tens of thousands of dollars to fix, and may not be covered by homeowners insurance.
• Inefficient Windows - Inefficient windows result in higher electricity bills.
• Plumbing Problems - Old or substandard plumbing system can cause major water damage in the walls and floors.
• Inadequate or Unsafe Electrical Systems - This can result into problems of safety and convenience. Insulation, electrical service panels and circuit breakers are also prone to deterioration.
• Failing or Inefficient Mechanicals and Appliances - Equipment near the end of its useful life is more prone to failure, raising the possibility of an inconvenient or dangerous situation. On average, water heaters last 10 to 15 years, furnaces/A/C last 15 to 30 years.
• Hazardous Materials - Lead and asbestos are two hazardous materials that were used in residential applications until relatively recently. If the property is older, from pre-70s era, the risk of finding these materials exists.
• Mold and Mildew Damage - Homes exposed to excessive moisture are likely to develop mold and mildew problems.
• Unhelpful, Unfinished, or Outdated Updates -There may be costly updates that need to be fixed, including poorly designed, inadequate, or simply tasteless interiors and incomplete projects, such as a partially finished basement or partially laid patio.
• Substandard or Unsafe Features - Older homes in particular may have many obsolete, even unsafe, features. Examples include steep staircases, low ceilings, blocked-off chimneys, and nonworking fireplaces.

Investment Deal

• Property Details - This includes information about physical design of the property, including number of units, square footage, and utility metering design.
• Purchase Information - This is basic pricing information, such as the purchase price and the price of any rehab or improvement work you will need to do.
• Financing Details - Financing details include the total loan amount, down payment amount, interest rate, and closing costs. Your lender or mortgage broker is the best source for this information, ideally through a letter of approval.
• Income - You will get this information from the seller, but do not rely on pro-forma data for final analysis.
• Expenses - This is the detailed information about costs of maintaining the property, including property taxes, insurance, and maintenance.

Investment Deal Metrics

• Net Operating Income - It is the total income the property generates (after all expenses), not including debt service costs (loan costs).
• Cash Flow - Cash flow is the total profit you will see at the end of the year from the property. To determine the cash flow, simply subtract the total expenses from the total income.
• Cap Rate - The capitalization rate (Cap Rate), is used determine what a property is worth. It takes into account vacancy, credit losses, other income, and operating expenses.
• Cash-on-Cash Return - Cash-on-cash (COC) return is directly related to the amount of cash you put down on the investment.
• Internal Rate of Return - Internal rate of return (IRR) for an investment is the percentage rate earned on each dollar invested for each period it is invested.
• Net Present Value - Net present value (NPV) is an investment measure that shows whether the investment is achieving a target yield at a given initial investment.

Real Estate Investing Mistakes

• Bad Financing - Bad financing can be one of the worst mistakes possible. Typically, bad financing includes a combination of the following: High interest rate, adjustable interest rate, high monthly payments, balloon payments, and personal recourse.
• Misjudging Resale or Rent Value - The number one job of an investor is to understand how the end customers (renters and buyers) make purchasing decisions, and then translate that knowledge into value. If you do not do your homework, you will have hard time making investments that earn a profit.
• Underestimating Repair Costs - First time investors have little idea how much it costs to renovate a property. They take advice from a home inspector or real estate agent who may just throw out a generic number. Always do a lot of homework and be very conservative in your budget estimates.
• Underestimating Renovation Time - Additionally, inexperienced investors are often overly optimistic when it comes to renovation times. They think it can be done in 30 days, or 60 days. More often than not, things can go wrong.
• Bad Tenants - One of the fastest ways to lose money is having bad tenants. Always check with your insurance policy and to see if it covers tenant damage. If you have a mortgage, you also want to be sure you have tenants that pay on time.
• Running Out of Cash - Usually investors run out of cash for two reasons: Underestimating repair costs or underestimating future capital expenses on a rental property. Either way can prove to be a large mistake.
• Letting Emotions Drive Your Decisions - The hardest thing about investing is managing your own fear and greed. It is easy to become overly enthusiastic and start believing your own fantasies. While enthusiasm is good, it should always be balanced with cold, hard, and objective analysis.
• Choosing Bad Contractors - Finding contractors who will do good work, finish on time, and clean up after themselves can be as hard as finding treasure on the beach. Bad contractors quickly become expensive, eating away most, if not all, of your profits.
• Planning as You Go - Inexperienced investors buy a house because they think it is a good deal and then try to figure out what to do with it. Successful investors first create a plan and then find an investment property to fit that plan.
• Not Using a Tax Professional - Laws change often, impacting your write-offs and reporting methods. However, if you do your taxes correctly, you are likely to enjoy some tax benefits. Finding an experienced CPA is critical.
• A good CPA who specializes in real estate will be up on all of the latest information, much more than one who only has one or two real estate investors as clients.