Buying Discount Property for the Long Haul
According to a recent Inman News article,
there are many benefits to buying discount property. However, there are
also some important steps to take before plunging in head first.
1. Know the Neighborhood
It is important to make an investment in rental property with as much information as possible. Some buyers get so excited about buying discount property that they don't go into the transaction in a realistic manner.
Basically, "Listings need to satisfy the interests of seasoned experts who know how to deal with the reality of a challenging environment. For example, a purely speculative investor who relies more on emotion than analysis may not know the history of a neighborhood, the strength of the rental market, or the repairs needed to transform a neglected home into a profitable investment." In order to create stability for people who are considering investment in real estate property, potential investors need to use their resources wisely and gather expert real estate and property management advice before moving forward.
2. Take a Calculated Risk
According to the article, risk-taking is key to market recovery, but only if those risks are associated with well-informed decision making. In essence, "The surest way to understand pricing in a distressed marketplace is to invest capital and take a risk position on a property -- this is the unique perspective that a veteran real estate agent, broker or investor offers. Which means you must analyze the evaluation of properties on both a 'market comparable' basis, and also as a long-term cash flow investment." This important information is also best gathered from experienced realtors or property managers in your area.
3. Boost the Area
Your investment in rental property can improve a neighborhood. Indeed, "The renewal of distressed properties is a win for everyone. By turning these homes around, and through our efforts on the ground, neighborhoods improve and price stability returns. Equally important, recycling these distressed properties into quality retail homes (and clean rentals) aids those owners who are currently underwater on their mortgages. Experienced local investors who have a stake in the long-term economic viability of a community are completely aligned with the interests of homeowners."
Getting informed and taking the steps forward to becoming a savvy investor while buying discount property and preparing it for rental will set you up for success and long-term stability that is certain to benefit everyone involved.
Comments (1)
Chris Clothier, I strongly agree! Regarding your Point #3 - investors really help a community when they put long money in discount properties. My focus is inner-city communities - which have a lot of discounted properties for sale. I don't think flipper cause harm, but short-sight, profit-only landlords sure do. There is a popular piece of conventional wisdom among real estate investors that says to view the real estate as a way to grow equity and then move that equity to a higher opportunity as soon as possible. I think this is good advice for everywhere except troubled communities. IMO investors that want to take that approach should stay out of inner cities. Regarding your Point #1 - may I suggest that investors talk to the local neighborhood associations, residents, and do quick litter surveys. These pieces of intel are ADDITIONAL steps a long-term investor should take before scooping up inner city discounted properties. OK, getting off my soap box now. Thanks for providing solid tips.
Al Williamson, almost 12 years ago