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The art of buying property at the right price

Here are some of the best ways to do that:

  1. Know the difference between price and value. Price is what you’ll pay for the complex; value is what you’ll receive in return. Remember that the stream of income a property generates isn’t necessarily where the wealth is. Appreciation is the true wealth builder. As an investor, if you can find hidden potential, analyze trends and follow sound strategies, you can find “valuable” properties.
  1. Practice sound fundamentals. Real estate prices aren’t just about real estate. Growth has a lot to do with job trends, social changes and economic factors. Checking out census data, keeping up with local news and understanding the culture of a place will help you find that sweet spot where there’s hidden growth just waiting to be uncovered.
  1. Analyzing cultural, economic and demographic trends at a high level of detail can be overwhelming. Laser focus your research on one price range and watch all the factors that influence the market only in that range. Doing so will make you a specialist in that area and help you know when you’re getting value.
  1. Don’t always jump on the bandwagon. Wayne Gretzky’s quote has become a cliché for a reason: “Skate to where the puck is going, not where it has been,” has great applications in commercial real estate. Trying to buy in places where competition is hot is a fantastic way to pay more than the value you’ll get in return. Use your expertise and the expertise of others to identify the markers of growth before it happens.
  1. The 30,000-foot view won’t always work. A lot of number crunching and data analysis can be done from afar but there’s no substitute for getting firsthand knowledge of a market. Go view properties in the flesh, meet with owners, tenants and debt holders to make relationships. That kind of due diligence can create opportunity and produce partnerships that can good for everyone involved.
  1. Kill your darlings. That phrase is often used in writing to mean if you’re too in love with what you’ve written, you could be blinded to potential problems. It’s applicable in real estate as well. Don’t let emotions or the love of one property keep you from walking away from a deal. Remember, the goal isn’t to get your bid accepted every time; it’s to find value.

By keeping these tips in mind, you may be able to find better values and find them more consistently. And, by finding value, you’ll be able to get predictable returns even in the midst of unpredictable events.

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