The Key Values of an Investment Property
What are the key values of a property to keep in mind?
Purchase, renovation, and after repair value are the three values that are vital when looking at a potential invest property. They not only tell you the dollar amount of the property, its potential profits, as well as its level of change, but they also tell you the story of your investment. What you think it's going to be and what you plan for it to be.
You should have a strong idea of what each of these values are at all times as they outline your end goal. Especially the end value.
It is not enough to go into an investment with a purchase value that you find ideal, you need to be aware of the renovation costs as well as the after repair value to see if the property is worth the effort. There might be enticing properties that have a lot of potential at first but they most often might not be the best deals for real estate investors.
By picking a property with the right values in all three sectors, you can make huge profits.
Key points: You should always know your end value before you proceed and It always takes twice as long to accomplish a project than you think.
Regardless of how well planned it is, you are never going to finish a project in the amount of time you think it will take. It’s just not very possible or likely. You need to be aware of some of the limitations around you and know that not everything is going to work smoothly and that you cannot control everything. There is always going to be some area of volatility and instability.
Just having a general idea of this fact is low-key important to have. You can plan everything carefully and to the details but get stuck with a renovation process hit by bad weather. Anything can happen, even the housing market can change. However, the more research and effort you put into drawing out the details, the better it will be. And the more aware you are of the possibility that not everything will go as planned, the better your chances are to course correct and salvage your project. Even having a realistic understanding of how long it might take is helpful information. Just remember, it’s going to take twice as long as you think.
A common misconception I see too often is that people think they make their profits when they sell their properties. That couldn’t be more wrong.
Conceptually, that makes sense as you are physically receiving money in selling the property. However, the reason why I think you make money in buying is because that is where you set your boundaries.
In buying a house and you want to use the BRRR method, you can reconstruct it and flip it so that its value is raised, but the key note to have in doing this successfully is to know your end value and determine whether or not buying it is worth it.
If you buy a property that you think is undervalued and can be transformed tremendously, you are getting a great deal. Not only are you spending way less in costs of purchasing the property, but you can gain some significant ROIs when you sell it later. It all starts with that initial purchase. That is where you set your boundaries that you are going to be working with. A smart, experienced real estate investor will know which properties are undervalued and which ones are not entirely worth it.
Unfortunately, too many people fail to capitalize off of this assessment and cannot pull it off. They might even acquire a good property with a decent end value but if it is purchased at too high of a price you are not going to see the profits you desire.
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