What Do You Plan To Do With That Investment Property in 5 to 10 Years?

What Do You Plan To Do With That Investment Property in 5 to 10 Years?

3 min read
Kevin Perk

Kevin Perk is a full-time buy and hold and fix and flip real estate investor with over 15 years of experience. He and his wife Terron operate Kevron Properties, LLC, a boutique real estate investing company in Memphis, Tenn.

Kevin was a past president and is a current board member of the Memphis Investors Group. He’s also a blogger and writer who has authored hundreds of real estate investing articles on BiggerPockets and his own blog, SmarterLandlording.com, some of which have been featured on The Motley Fool and MONEY: Personal Finance News & Advice.

Kevin is also host of the SmarterLandlording podcast.

Originally from the Washington D.C. area, Kevin moved to Memphis to attend graduate school at The University of Memphis. After receiving his master’s degree in City and Regional Planning, Kevin climbed the planning career ladder to eventually become planning director of a county in the Memphis metro area. He “retired” from planning in 2003 to pursue real estate investing full-time.

Since “retiring,” Kevin’s main real estate investment strategy has been to buy and hold, otherwise known as landlording. Generally working in historic Midtown Memphis, Kevin is also known to fix and flip grand, historic homes when the right opportunity presents itself. He and his wife Terron (who is the principal broker at Perk Realty) have participated in dozens of real estate transactions in the Memphis metro area.

Kevin has the heart of a teacher and believes in helping others through education. An instructor of college-level geography for over 25 years, Kevin also regularly participates in seminars and panel discussions at such forums as the Memphis Investor’s Group and the Single-Family Rental Summit.

In addition, Kevin has been interviewed in publications such as the Memphis Commercial Appeal, the Memphis Daily News, and the Foreclosure News Report.

Kevin earned a master’s in City and Regional Planning from The University of Memphis.

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As real estate investors, we look at the numbers before we buy any property (at least I hope we do).  We want our properties to cashflow.  We want to make good, solid investments that will provide solid returns while we own them.  But what about when you are ready to sell, what are you going to do with that property in five or ten years?   Many times investors may not think about that.  But they should.  What should they be thinking about?

What Type Of Property Is It?

Apartment buildings, commercial strip centers ,even farmland, to some extent, are considered investment properties.  That is, they are purchased because of an expected income.  These properties are very different from single family dwellings, as they at least have the potential to be sold on the retail market.  There is no retail market for investment properties.

Retail and Investor Buyers Buy For Different Reasons

Leading in from the above, different types of properties will have different types of buyers.  Investment properties will likely be sold to other investors.  They, like you, will be looking at income.  They, like you, will be looking for a deal.  Therefore, unless you are in a very hot market, do not bet on appreciation with investment properties because unless you can get the property’s income up or the expenses down, the value will likely not increase.

A single family home is generally the only property that you can buy that you will be able to sell on a retail market.  Retail buyers are different from investment buyers.  They buy properties because of a particular school or because it is near to work, family or some other amenity.  They will pay a premium for that.  Investors generally will not.

Related: Why I Invest in Single Family Homes Over MultiFamily

Niche Properties Have Fewer Buyers

Investors are a picky bunch.  We know what we know and like what we like.  Apartment owners are not going to buy industrial property and vice versa.  Single family investors are not going to like apartments.  B class property owners may not like D class properties.  The list can go on and on.  The point is that there are fewer and fewer buyers for your properties the more specialized you become.  Just look at all those empty big box stores in older parts of town that were built for a specialized tenant.  The more specialized you become, the more difficulty you will have finding a buyer when you are ready to sell.

Where Is The Property?  Remember Location, Location, Location.

Location, location, location are still the three most important words in real estate.  All investors should learn about the area they are investing in.  Are they in the path of progress?  Are they in a stable or declining neighborhood?  Is it in a good school district?  Is it near jobs?  All of these things can weigh in on the price you will get when you go to sell.  What are the future plans of your city or community?  Investors should keep up to date.

Related: Long Term Real Estate Investing is like Pitching: Timing and Location Quality Rule

Who Is Buying In Your Area?

Look around at who is buying in your target area.  Is it homeowners, investors or a mix?  Who is buying can affect your exit strategy down the road.  For example, you may be investing in single family properties in a predominately single family neighborhood, but all the properties around you are also owned by other investors.  When you are ready to sell your only buyer is likely to be another investor who is looking at the numbers and for a deal just like you were.  Retail buyers will shy away from these areas.  I see this happening all over Memphis and I am sure it is happening elsewhere as well.

To Sum It Up

One of the old adages in real estate says that you make your money when you buy, not when you sell.  I hope the above will get you thinking about your future investments as we all will likely want to sell at some point.  When you put some thought to it, the above factors and more may just influence where and what you buy.

As real estate investors, we look at the numbers before we buy any property (at least I hope we do).  We want our properties to cashflow.  We want to make […]