“A wise man will make more opportunities than he finds.” – Sir Francis Bacon
Lets talk numbers.
As we have talked about in previous articles it is all about the numbers. Whether it is an apartment or a commercial property the value is almost always derived from how much money it makes.
Many owners of investment property love to tell you how much they paid for the property, what kind of nice amenities the property may have and how much those amenities cost. Like many of you, I own property as well and this is a VERY tempting thing to do.
But guess what? The new owner of the property does not care NOR is that important to the value of the property…
What is important are the numbers. How much NET income do I have coming from that property year in and year out? It is all about increasing the net operating income. Everything else is secondary.
You see, it does not matter if you just replaced all of the carpets, sinks, toilets, put a new roof on all of the buildings, have a maintenance free exterior IF YOU CANNOT INCREASE YOUR NET INCOME ACCORDINGLY.
A great book I recommend for you is “Winning Through Intimidation” by Robert Ringer. I recommend this book for a lot of reasons. But for the current case in point, Ringer is a guy that used to be a commercial real estate broker.
He has story upon story of how large developers got an undesirable reality check when they found out their properties were worth less than they thought they were…tens of thousands less. This was all because of the income these properties produced. The problem is that many of these owners would be 100% focused on how much THEY paid vs. how much it is worth NOW.
Remember, we are interested in how much it is worth now BASED ON how much money it is making NOW…and not the pretty brick exterior.