During the past couple of years I have worked with several potential investors who were looking to purchase investment properties for dimes on the dollar. This has been mostly a futile effort.
While reading an article by Greg Rand, CEO of OwnAmerica and author of the book, "Crash Boom: Make a fortune in Today's Volatile Real Estate Market", it dawned on me that I am working with the wrong investor group.
According to Rand the emerging individual investor today wants to get rich gradually, by selecting high quality properties in today's great market. They have jobs, own businesses and approach investing as a wealth management pursuit. They tend to be quality investors with cash, who want to set realistic expectations of returns. They intend to hold, not flip!
Now we look for solid single family homes, or smaller duplex units, in a good neighborhood. Priced well already, we try to negotiate the price a bit more at the start, but do not use gouging techniques. We are likely to go back after inspections and get help doing some repairs, or negotiate the price a bit more.
Our goal is to find a property that, when the negotiating dust settles, brings a comfortable cash flow to the investors portfolio. A 10% cap rate would be wonderful, but the right property with a 6-7% cap would do very nicely. Remember, we are now in this for the long haul, not a hit and run strategy.
This concept is designed for the individual who has the ability to put money aside for good investments, or is able to pay cash. There are still good deals out there every day, and more are coming. But...and this is a big but, as the economy corrects and we get closer to a balanced and stable real estate market, there will be less good deals.
Now is the time to start working on your retirement vehicles, and the wise investor will be including real estate in that equation!
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