Investor, Know Thy Customer! Who Is Your Buyer?

Whether employing the ‘fix & flip’ or the ‘build-new’ strategy, one factor that must always be considered when establishing the value of an RE investment: Location!

Two derivatives of that postulate that are also true and affect project ROI are the Customer and Local Codes. An example may help to better understand.

Recently, an investor approached our company regarding a vacant lot she had under contract to buy in Austin, TX. We are very familiar with this vibrantly active and rapidly changing neighborhood. She had been told by other contractors (not familiar with this area) that it would not be possible to make money building on this lot.

After some quick research, we met her at the property. It was clear that her previous advisors were unfamiliar with both the local codes and the ‘typical’ buyer of new homes in that area. Armed with intimate awareness of 1) the area’s underlying value to a specific buyer type and 2) the specific local neighborhood plans, we developed a project that created a high 5-figure ROI! Knowledge really is power!

Understanding the local customs, jobs, access to transportation alternatives, lifestyle choices, etc. plays a dominant role in determining potential value.

Bottom line: Who is it that feels driven to live in this location? What are their likes and dislikes? What do they value and what do they ignore? Questions like these require a deeper understanding of the local neighborhood and the buying decisions being made there in past year or two. Knowledge will focus project decisions including locations, style, pricing and others.

Whether you are new to fix & flip or merely new to the location of interest, there are two professionals you must consider in your team. 1) A locally successful, investor-friendly Realtor and 2) a Professional builder/contractor familiar with the subject locale. As part of your strategic team, they will guide you to make the best buying, renovation and pricing decisions.