Investment Strategies ?Buying Real Estate For Its Potential?

Home buyers are often asked by their agent to look past the current condition of a property and consider buying real estate for its potential.? New carpet, some paint, a little landscaping, and perhaps moving a wall or two.? The highest potential value of many properties is often hidden beneath poor decorating choices, worn out furnishings, a poorly maintained structure, and lawns covered with weeds.? Rather than passing on a home that needs re-hab to realize its full potential, home buyers may consider a strategy that turns the condition of the property into negotiating leverage.

A similar approach can be used by investors acquiring rentals, whether buying the property to flip or seeking long term income.? The seller will usually set a sale price (which we, as buyers, may or may not offer depending on current demand?) based upon the condition and profitability of the property as it presently exists.? Should investors plan on accepting the same profit margin the current owner receives?? NO!

Buying for potential simply means that as investors, we look past a property?s current condition and consider what it could produce financially if we develop its potential.? We run our financial forecasts based upon post-upgrade value to determine just what our investment will pay back in the long run.? But we start the process by buying smart, so here are some criteria we can use to do our daily property search:

? Great location (if not, absolutely keep looking?)

? On the market 60 days or more

? Rents are currently below market

? Seller is willing to negotiate

? No major faults in foundation or structure

? Upgrades can be estimated with reasonable accuracy

These criteria can be applied to any type of property ? single family homes, multi-family residential, and even small commercial properties.? Once a property makes it through our initial screening, we can apply additional criteria to reach an offer decision.? If we stick to our criteria and keep our eyes open, we are sure to find properties that have amazing long term potential.

If you have questions about real estate investment strategies or would like help with finding great deals on investment properties, drop me a line!? john@jsrealproperty.com

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John A. Souerbry & Associates (DRE 01370983)? Bay Area Real Estate

Tags:? Silicon Valley Residential, Napa Valley Residential, Fairfield CA Residential, real estate investing, buying investment real estate, homes that need re-hab, buying property to flip

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