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The Pre-Acquisition Phase in a Real Estate Investment is most likely the most difficult phase with far reaching impact on the entire outcome of a Property Investment. Your Investment Philosophy is set, the Property Market Research and the pre-selection are done. To ensure that at the end of the effort is most likely a purchase, somewhere around 3 to 5 properties are short-listed. At the same time there is not all the money in the world to be paid on this elimination process and the vendors and agents will push for a decision because other investors are interested. Who knows, they might even exist and snatch the best property you have seen in years from under your nose. So there is the other factor next to money: Time- or more precisely speed. I will show which processes will need to be applied to make an informed judgement.

You have your short-listed properties and first list the key figures provided in the exposés in a table, like: Plot size, building age, No. of rental units, size of rental space per use (residential, commercial, retail, storage etc.), net rent owed, etc. and everything that is made available voluntarily [Tool]. Based on these figures you will have made your pre-selection by calculating the price per sqm, net yield, asset factor as multiplier of the net rent and maybe more. These Key Investment Parameters [Tool] will be monitored throughout the following process. Most likely you will see deterioration and later on I will show you why.

Next step will be a Desktop Exercise. You might already have to push for the information because the agent you are dealing with and the property managers have a different agenda. Sometimes they share the commission which usually makes life a lot easier. During the desktop exercise you make mostly sanity checks. You request the rent table.

Now believe it or not, this list already poses a challenge to most vendors and their agents. Lists with the degree of detail that is required are quite often not automatically produced by the property management software. If you are persistent you will eventually have all the information needed. You can now perform your checks which in the first step will be comparing the sums. Do not be surprised if you already lose 5 % of the rent table space or net rent, sometimes more, it has happened to my clients many times. I do not want to give the impression that it is all deception but interestingly in the end you will very often get less for the asking price.

At this point it is time to start another list: Objectives for negotiations [Tool]. You have already invested time and money into these pre-selected properties so you do not want to discard them straight away. You need to figure out, how much adjustment needs to be achieved in the price in order to meet your investment criteria you have determined in your Investment Philosophy. If the desktop exercise has so far come to the conclusion of major price reductions you will need to put a hold on the process to find out from the agent if there are options for reductions, given the new figures. If there is no option you should abandon the property at this point and turn to the other properties which you worked on in parallel and hopefully do not show a similar degree of deterioration, they are not all like that!

Similar exercises are performed in the technical review which will be the subject of a later follow up to this article.

In the next parts I will provide more insight on some further information gathering using public records like rent tables etc. to determine if the property is at its prime rent level or even at risk of being over-rented in the current property market or if there is a possible upside on the income side.

You will have seen [Tool] in the text. This indicates tools that will be provided in a more detailed e-book to be published early 2008. To sign up for auto notification of more articles of this kind and the e-book with tools please register on the research page of the website of Berlin Portfolio Ltd.

The author is a Berliner and active in the German property market for more than 25 years. Experienced as project manager, developer and head of the German Business for a UK based property consultancy he now owns and operates Berlin Portfolio Ltd His international background and local expertise is an ideal combination for an international investor.

He is also the author of numerous publications, for announcements and updates we recommend to sign up on the research page of the website of Berlin Portfolio Ltd. For Property Search we recommend Properties in Berlin

Source: www.articletrader.com