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Two Steps in Real Estate

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shane99 | 18 Jan 2012, 02:28 PM Agree 0
Two steps to take when valuing any real estate investment property:

1) For any real estate stock purchase, you should never pay more than a 10 percent premium to the properties' fair market value; when purchasing material real estate, in the same way, never pay more than 10 percent over comparable neighborhood properties. In fact, try to buy the property at about a 20 percent discount (even if you need to do some minor fixing up after purchasing.

2) A real estate investment should be treated like a business. Like a business, it also has profits and losses in the form of rent and expenditures. Look at the long-term P/E ratio of your prospective investment (don't look too closely at the short term); it will tell you a great deal about the inherent value of the piece of real estate.
  • abroaduni | 18 Feb 2012, 09:18 AM Agree 0
    I agree with you fully about real estate info,these are very useful and helpful steps for real estate buyers and investors too.And I would like to give thanks to you for sharing these steps....
  • OliverInvestments | 08 Jan 2013, 06:02 AM Agree 0
    In my experience, while it is GREAT to get a deal for my purchases (i.e. discounts), I have purchased a couple of properties @ market value which have done very well for me and my clients.

    What you really need to focus on is the Economic Fundamentals of the area that you are investing in - that is step 1. ALWAYS buy in places where JOBS are continuously created!

    As for what else to look at, here are some next steps to check the economic fundamentals!

    Economic fundamentals include:

    [b]Mortgage Interest Rates - How the Prime Rate and the Bond Rates affect people`s decisions on real estate investments

    Net Wealth Effect - How does the increase in disposable income affect us? It is absolutely imperative that the region's numbers are compared to the provincial and national averages in terms of

    Increased Average Income

    Decreasing Income Tax Rates

    Increasing Retail Sales

    Increased Job Growth and In-Migration - Where are the jobs being created and are people moving into the towns affected? More people means more demand for real estate, which ultimately means that positioned effectively, larger ROI!

    The Real Estate Doppler Effect - Major investment zones are often become saturated VERY quickly. By anticipating which towns and neighbourhoods will benefit from these, sustained ROI can be realized.

    Local, Regional, and Provincial Political Climate - Business friendly generally equals business friendly. For example, the Ontario government puts a 1.5% rental increase limit for every re-leasing, limiting cashflow calculations for investors. In comparison, Alberta's only provision is to limit the increases once per year.

    Critical Infrastructure Expansion - Trains, Planes, and Automobiles. Where are the new roads being built? Trains and Transit Expansions? The areas around these developments experience a much higher boost in terms of ROI, so awareness of these facts is absolutely essential.

    Increased Cost of Labour and Materials - Oliver Investments focuses only on re-sale houses. Therefore, it is very important that we know if the cost of construction is getting too high since this drives the re-sale real estate investment up!

    Areas of Gentrification and Renewal - There are many areas that to the untrained investor seem like a bad place to be in. However, we focus on researching how much money the government is putting on to these areas, and what new private developments are going to be constructed so we can get in before the developments are completed, driving the ROI up!

    Maximizing Zoning Opportunities - Sophisticated investors learn to first look at a property's physical attributes, where the property is located, and what it is used for. Then they examine how they may be able to change that property's use to optimize profit, an investment strategy that goes way beyond renovating an existing property to add re-sale value. This is one of the greatest strengths of Oliver Investments, taking a single family dwelling and converting it to a multi-family premise, thus doubling the income potential and re-sale value.

    Buy Wholesale, Sell Retail - As with the point above, picture the following scenario: You purchase a larger multi-family property, and then convert the property so that each suite has an individual title. this is known as condominiumization. Now you can sell the individual units one at a time for substantially more than what you paid for the whole lot.

    Stand Out From the Rest - Quality marketing is a critical tool for real estate investors. You need to become proficient at it if you wish to get higher than market rents and values for your properties. By using proven marketing strategies, you can attract the type of buyer, seller, or renter that you want, while at the same time reducing the effort it takes for you to run your business. Quality marketing is a real estate investor's best kept secret. It allows you to maximize your income, minimize your purchase prices, and maximize your selling price.

    Renovation and Sweat Equity - Doing renovations on a property can dramatically affect its value. Looking for well-built, but somewhat neglected properties in areas that are showing an increase in pride in ownership is something that Oliver Investments do on a regular basis. Making sure you understand which upgrades give you the most payback and which are a waste of money is essential in this endeavour, almost as important as having contacts which perform these renovations for you at the fairest prices possible.[/b]
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