If there is one thing that we must constantly beat into our brains when making decisions about real estate investments, either for ourselves or our clients, it is this principle.  

It's not only about the numbers, although these do have to be right; it's about building, location and demographics.

What condition is the building in?  This information can easily be obtained by a thorough property inspection.  I cannot emphasis enough how important getting a third party -- someone like my go-to-guy, Jamie Stoulil with National Property Inspections; someone who is independent -- to thoroughly inspect the building and its current condition.

Location is critical.  Not that the property has to be in the so-called "best" location.   To the contrary, what it has to be is a building that is in a location that you the investor, or prospective homeowner, really understands.  You take some time to understand the advantages and disadvantages.  Location can cure a world of sins, but not all. If that were true, millions of retail businesses would not fail every year, and 10's of thousands of foreclosures on the market today would not be happening.  A property right in the center of an old city might be a better investment than one right next to the latest mall -- it's just that one must take the time to understand how the location is impacting value. 

And finally demographics.  This is not about discrimination; this is about the direction of the income for those living in the neighborhood.  If the building is in an area of declining incomes, would it be worth more in five years, or less?  If the building is a multi-family residential property in an area where most tenants have to pay their own heat, but for this property, the landlord pays the heat could this be a major competitive advantage to attract tenants to your new building?  What is the rate of population growth or business improvements in the surrounding area?  Places like Loopnet.com offer extensive demographic information on buildings, as will the local county assessor's map of recently sold properties in the area.  If there have been a lot of recent sales, what does that mean?  We need to take some time to understand the demographics.

So, it's the numbers, then building, location, and demographics.  This is what makes for a sound real estate investment, be it for an owner-occupant or an investor.    Shirk your due diligence responsibilities on any of these and prepare to accept less than an optimal return on your investment.