The Question Every Investor Should Ask to Get the Most Out of Each Property [With On-Site Video!]

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“Successful people ask better questions, and as a result, they get better answers.” — Tony Robbins

When a real estate investor purchases a property — whether for buy/hold or buy/sell — they often ask the WRONG questions. They want immediate answers, but they are not willing to ask empowering and thought provoking questions to actually lead them to the right solutions and answers. In today’s video, I discuss the most important question you should be asking yourself with every property you get involved with:

“What is the highest and best use of this property?”

In the video, I discuss one of our mixed use rehabs that is under construction. I asked this question before we created our plan for the building, and it has helped guide me towards the best plan for this building.

Asking and then answering (I mean honestly answering) this question is the key to success for any real estate investor.

The building before and during demo:

DSCN1904

362 s broad demo 2 362 s broad demo 3 362 S Broad Demo

What other critical questions have you asked yourself before taking action in one of your buildings?

I would love to hear from you in the comments section below.

About Author

Matt Faircloth

In 2005, Matt founded The DeRosa Group along with his wife, Elizabeth. At the time, the two person company owned and managed two assets – a single family home and a duplex. Over the last nine years, they have grown the company to a 12 person team owning and managing over five million dollars in residential and commercial assets throughout the central NJ and Philadelphia area. One of DeRosa’s mantras is “to make money while making a difference.”

12 Comments

  1. Anthony Uva

    Matt, I not sure how you plan to use the new parking lot. Will you monetize it by using the lot as paid parking or do you intend to use it to increase the desirability and therefore value of your adjacent mixed use and nearby commercial properties ?

    • Matt Faircloth

      Hey Anthony,
      Great question. The lot will add value to our two buildings that are adjacent to it as we will offer up paid parking as an add on to the tenant’s leases. Although there is a fee, parking right outside your office / store / apartment is of value in this area.
      We will charge $50 per spot and have 15 spots slated for the lot. To break those numbers down, we paid $18,000 to remove the back section and are budgeting an additional $5000 to pave the lot, so $23,000 invested to create the parking. With all spots leased we will have revenue of $750 per month or $9000 per year, which is a 39% return on our capital per year. All expenses like tax and insurance would be paid by the rents from the part of the building we didn’t tear down.
      Now let’s compare that yield to the other option, which would be leasing 800 SF of space in the back of our building. Renovation of the space would cost $40,000 including structural repairs, roof, rock, paint, and electrical repairs. Rents are hard to predict as the building has a front section with 2000 SF remaining, so I would have had to offer this renovated space as an add on to that tenant. I didn’t see how I would arrive at the same yield, and actually think that I would have had to “throw the space in” with a prospective tenant because they just would need it. And they would be asking me where they are supposed to park, LOL.
      Thanks again for the comment, I’m glad it gave me a chance to break the numbers down.
      Matt

  2. Aleksandar P.

    Matt, another great video and a valuable lesson learned. I have a question though: How hard it is to change the zoning of that single story building to the parking lot? I didn’t know you could change the purpose of the Real Estate just like that.
    Thanks.

    • Matt Faircloth

      Hey Aleksandar,
      Good to hear from you. The zoning for the building allowed for several uses, one of which was a parking lot. It’s a mixed-use building so commercial and residential uses are also allowed. If we had converted it to, say, a gas station then we would have had to apply for a zoning variance which would have taken another 4 months. No thanks!

      Matt

  3. Kenneth Jackson

    Matt,

    Thank you for the post. Very interesting and thought provoking. I am not currently a real estate investor but I hope to take that plung soon. Do you have any advise on best practices to make myself smarter on rehab costs and cost/benefits analysis so that I may approach my investment opportunities with a better understanding and confidence about whats possible?

    • Matt Faircloth

      Hi Kenneth,

      Good to hear from you. I would suggest that you consider one of the rehab analyzer softwares out there. They typically have estimates for costs included in the spreadsheets. If your goal is to get exposure to general construction methods and knowledge, consider spending some time on a construction jobsite either as a volunteer or apprentice to learn hands on.

      For the anaysis softwares, I use Flip Analyzer, you can find it at http://www.RentalSoftware.com. I actually negotiated a coupon code with them, use “derosa” to get 10% off. I hope that helps!

  4. Ashley W.

    Hi Matt,
    Very thought provoking, I appreciate you sharing this as I’m new to REI. I’ve read a lot about creative financing, this post is a great way to provoke creativity with the properties themselves!

    Many thanks!

  5. Matt, I must say that i am really impressed with fascinating question “What is the highest and best use of this property?” The other thing investor should know that What quality of material used for construction?

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