Whenever I hear about “the real estate market” on the news I hear all kinds of interesting predictions. Prognostications abound in the news industry these days, don’t they? One thing that will definitely be happening that KIND OF has to do with commercial investment real estate is the SEC governance of properties and partnerships.
So, we know that there will be some more regulatory red tape coming our way in terms of what I call the ‘50 Billion Heist’ but what about properties in general? What should we be looking for? I am going to tell you what you shold be looking for and what you should be avoiding during these uncertain economic times.
What You Should Be Looking For…
You need to have your money, or at least SOME PORTION of your money in a well located well maintained apartment property. The apartment property needs to be in an average to above average area and same goes for the condition and the tenant mix in the property as well. I am looking for large value and cash flow increases in these properties over the coming years. Sooner vs. later actually.
Having this kind of property being a large tool in your wealth building tool box will be very important to your wealth — especially because in many cases our wealth has diminished quite a bit over the last year hasn’t it? We need to be looking for other areas where we can make up for lost ground and my friend these kind of apartment properties will be able to do just that.
So, not so much of a puzzle in terms of what you should be looking for in general. Of course you want to make sure that he project(s) has the following attributes:
1. Rents are currently below market.
2. Expenses are higher than need to be.
3. Competent Management In Place.
4. Good track record of occupancy with more longer term tenants.
Like I said, not brain surgery but as you will find a small minority of properties that are available actually meet these qualifications so don’t be surprised if your search or wait takes longer than you think.
What You Should Avoid…
1. Government Subsidized Housing.
Run as fast you as can from the communist rooming houses. You never want to own a property where the tenants have the say so and you don’t because it’s the tenants that the government listens too—not you.
These projects are more trouble and hassle than they are worth…there is a reason why a large majority of foreclosed apartment complexes are government subsidized…you actually don’t own them—THEY do…
2. Converted Housing.
Stay away from loft units, or units that were once a warehouse building. Not good. Also stay away from the large and many times older homes that used to be a 4 story home but has been converted into 12 sleeping rooms. Run away from these as well unless you want a course in bank account draining on ridiculous repair and maintenance items.
3. Good property in bad locations.
Sometimes you will find a nice looking and nice maintained property in a bad location and be tempted to buy…Don’t. Always remember that you can change a property and its make up in terms of condition and even the kind of tenants you get but you cannot change the location.
Follow my rules here and you will have a huge 2009 while everyone else is whining about how bad their investments are doing!