Whenever a real estate investor is considering a particular investment property, numbers are given regarding the property like price, price per unit, and cap rate upon which the investor is expected to make an investment decision.

Therefore, the question is, should the investor accept the numbers and make the investment or should the investor question the numbers?

Of course, the easy answer is that the investor should question the numbers, but the more legitimate answers lay inside questions the prudent investor should himself be asking about the rental property.

Let’s start from the beginning.

Say, for example, that you’ve alerted several real estate professionals in your area that you’re in the market for an apartment complex, and soon thereafter get a call from one of the agents about a ten-plex for sale in the MLS followed by a fax or email with the listing information.

Should you become excited because the property is touted to be a great opportunity, with lots of upside potential, and in a good part of town? No, you shouldn’t, for several reasons: First, because none of that directly addresses the profit you might earn from owning that rental property, and secondly because the agent who sent you that information is merely shuffling some listing agent’s data and appears ill-informed about real estate investing or at the very least, extremely lazy.

Let’s try another one. Suppose one of those agents calls you describing an apartment complex as “beautiful”, how should you respond as an investor? If you’re astute, your response will probably be similar to that of one of my investors. “Only women are beautiful,” he said, “what are the numbers?”

Here’s the point. Real estate investing is all about the numbers. Whether or not the rental property has a good location means little, unless by “good” the agent is suggesting that the property commands high occupancy and market rents. Likewise, terms like “great opportunity” and “lots of upside potential” are only credible when there is evidence to support it. Either way, you should expect the agent who presents you investment property to also present numbers to back the claims.

Okay, that brings us back to our question, should you trust the numbers you’re given regarding rental properties? No, but it’s not a moral issue. Most brokers are honest, but bear in mind that a listing agent often uses the rents and operating expenses supplied by the seller, and only in rare cases actually substantiates those numbers. Besides, most listing agents tend to be over zealous and optimize the numbers.

Conversely, I would question a realtor who is trying to sell me investment real estate if he or she does nothing more than passes me information gotten from the listing broker.

In this case, I would expect to see much more than what appears in a typical listing. I would expect before and after tax cash flows and rates of return based upon my marginal income tax rate so I can see my taxable gain or loss and underlying returns, a comparable sales report, a proforma income statement with revenue projections, perhaps some rent scenarios and an acquisition funds summary, and so on. In other words, I would expect a broker who supposedly is working for me to “partner” with my efforts and provide me a full rental property analysis I can compare against my investment plan.

I look at this way. If a realtor wants me to invest hundreds of thousands of dollars so he can partake of the booty, the least he can do is invest several hundred dollars on real estate investment software preparing to assist me with a prudent investment decision; the least he can do is care how I spend my money.

If you’re fortunate to find a real estate agent able and willing to stand alongside helping you crunch numbers, then half your battle is won. If not, don’t simply accept what’s presented you, obtain your own real estate investment software and run the numbers yourself. Remember, all the numbers associated with real estate investing are like peanuts, you don’t swallow until you crunch.

It is your nest egg at stack after all by golly, and come hell or high water, with or without the help of a realtor, you will not make an investment in a rental property until you comb through the numbers fully satisfied you are making the wisest investment decision you can to safeguard it.