You invest in property. You’re approaching it as either a residence, retreat, rehab, or rental. But which came first, the property or the label? And more importantly, why did you choose one over another?
With such a substantial investment, I hope you have an idea of how you are evaluating on the way in based on your plan for use/ resale/ or rental afterward. So many clients start out with the “well this happened along our path one day so we just…” approach. Maybe o.k. for a garage sale find. But this randomized thinking potentially leaves dollars on the table and years of your life wasted.
- Customer wanted to sell a unit. “Why did you buy it?” I asked. “Well, it was a great deal so we bought it. then we rented it out”. ( A great deal for what ?)
- Customer wanted to have a unit inspected. “Why are you interested in this house?” I asked. “Well, I heard rental property is a good idea.” I asked, “Why?” …. he said “I don’t know.”
- Customer had a rental. “Why did you buy it?” I asked. “My friend called me and asked if I wanted to buy it.” So I asked, “do you have other rentals and why do you want this one”. He said, “no, first one, we want others”.
None of these folks had a strategy. They stumbled into their situation. In each case, I sat with them, started ‘at the top’, looked for customer strengths/ weaknesses/ and ideal goals.
- For customer #1, I said “so you want rentals?” Actually, it had never been profitable as a rental. They sold it for a profit, but the title choice drove up their tax burden. Further, had they made some specific improvements, the profit would have been better. They sold to a hustler by owner, but fortunately we took a better strategy going forward.
- For the 2nd scenario client, I tried to not completely make fun of the poor choice of home he wanted to – and almost did had he not called me – buy. Instead, I showed him only 1 more property. We spent an extra 60 minutes of his time, got a house in a better location, less money, newer, better heat/electric + 2 car garage, 2 decks and shed. That property more than doubled in value in a matter of months, and has had only 1 tenant in the 4 yrs. he’s owned it, bringing a good profit from rent and appreciation. The other property – still a mess and not worth much at all.
- In situation #3, we sat down and looked at how there is no profit from holding. Further, because of his skills, he’s better suited to rehab than to hold a loosing investment. All profit available on his held house will come from moving it, not holding it. Timing the sale will be the extra expertise I offer.
So the basic questions will still be, what do you have:
- More or less skills.
- More or less time.
- More or less funds.
- More need for current income (you are in a lower tax bracket), or more need for future (retirement) income, (you are probably in a higher tax bracket).
Based on these answers, there are very specific properties, areas, price ranges, and portfolio management styles (e.g.: you/ us) you’d be better suited for.
I meet w/ clients a minimum of 1x/ year. This is a great time for a no-cost initial meeting to chat about what your real estate ideas are. Contact me via the feedback form to set a time & day !
In the meantime, I’m inserting text from an earlier post of mine:
In the early 80’s I picked up a very honest yet motivational ‘how to’ book on real estate investment. In my senior year of college I was set to invest. I actually drove to NJ, looked up as many of these homes as I could, took pictures, and tried to take notes in my then ignorance. After reading the book I bought a shack for $17500, w/ $1000 down, gutted the kitchen and bath, and placed into service what was one of my most successful investments to date.
I’ve used these & other techniques I gleaned from my broker/investor dad, and have shared them with clients for 3 decades.
It comes down to humble work, patience, time value of money, and good mentors – I had my dad ! I keep a few copies of the book for clients I work with. Let me know if you’d like one.