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If you were offered an apartment property with a few issues, such as high vacancy, deferred maintenance, and lousy management, would you buy or pass?
Many people would pass stating it would be too much trouble to fix the errors, and there is so much on the market with fewer issues. Others would ask, “What is the lowest price you would accept for this property?”
Both answers are legitimate depending on your investment desires. Maybe you would like something that has stable cash flow, and has been kept up. This type of property will cost more to purchase and the rate of return would be lower than if you considered something else.
The something else property, the “problem” property could potentially yield higher rate of return than the property without flaws.
With the “problem” property you could negotiate a much lower price due to the high vacancy and deferred maintenance. This lowering of purchase price could give the advantage of a higher rate of return when making the improvements and leasing to new tenants, netting more cash flow.
But remember when picking a “problem” property, the area is the key to success. If you pick a “problem” property in an area which is also a problem, you may want to reconsider the purchase, only because it would take more time to straighten out an area versus straightening a “problem” property in a descent area.
Once the problems are corrected in your flawed property, the rate of return could potentially sky-rocket past the property without flaws.
Many people find that being a private lender erases most of all the risks, and yields high rate of return for minimal effort. If you need more information please visit our website or call 323 988 7205 x 106
