Let’s talk about establishing crystal clear criteria—CCC. This is something I think everyone needs to do. Start now, and you can adjust it as you go.
In real estate investing, as you analyze deals over time, you are going to find out what you like. It does change; it will change. But you’ve got to get specific.
There are 5 parts to CCC. Here they are.
5 Components of Crystal Clear Criteria
1. Property type
Are you going to buy a single-family, or are you going to buy a 20-unit? Now, obviously, if you say 20, you can go 25 and go 15—whatever. But pick that property type.
Related: 4 Buying Criteria for Rental Property (& How I Determine a Good Deal)
2. Location
Where are you buying? Every location is different. You have to learn all new stuff no matter where you buy.
And once you get really good at it, you know it, then fine. Go ahead and expand somewhere else. But in the beginning, pick your location. What zip code are you going to invest in?
3. Condition
Do you want fixer-uppers? Or do you want them already fixed up? Pick your condition. Maybe you want somewhere in between.
Related: How to Analyze Real Estate Deals in 3 Easy Steps
4. Price range
Are you going to buy a million-dollar property? A $100,000 property? A $10 million dollar property?
5. Profitability
What makes it a good deal? Decide right now—get very clear on what defines a good deal for you. Is that a 15% IRR? Think about it for you, or if you’re doing multifamily, think about what would define a good deal for you and for your investors. Because if you don’t know what a good deal looks like, then what are you analyzing for?
You have to know those five things up front. Then, you can become an expert. Now you can be like, “OK, well, I know that I’m trying to buy duplexes in Cincinnati that are fixer-uppers under $200,000, and I want to make at least $200 per unit so I’ll make $400 in cash flow.”
That’s some clarity, right?! That’s like showing up to the gym and having an exact outline of what you’re going to work out that day. And you can go and do exactly those moves and get the exact muscles you want to get, because now you’ve got crystal clear criteria.
Questions? Comments? Advice?
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