Investing in rental real estate is one way of securing additional income in the medium and long term. But how to distinguish an average deal from a real bargain?
Investing in rental real estate is one way of securing additional income in the medium and long term. But how to distinguish an average deal from a real bargain? With experience, but also with a lot of research, you can hone your skills in order to better recognize great real estate investments when they present themselves.
Here are three tips to track well-priced investments.
- Know the dollar value
First, what is a bargain? It is generally accepted that this is a property that sells for at least 10% less than the market price.
To properly compare the value of a building with the market and its location, it is essential to understand all the factors that justify its price per square meter. In real estate, the saying “Knowledge is power” is worth its weight in gold.
Familiarize yourself with the areas that interest you in a meticulous way. Study how location, nearby services, inconvenience (railroad, noisy area) and future urban developments influence the price of the real estate you covet. This data will be valuable to evaluate your bargains and will make you an ultimate real estate fox.
- Tracking sellers under pressure
Identifying distressed sellers, heirs and other anxious owners could save you a considerable amount of money. The problem? Foreclosures are often sold before being listed on the market.
Here are some tips for locating distressed sellers:
- Consult the Government of Quebec’s land records every day.
- Do business with a broker who will put you in touch with reputable bank representatives and trustees.
- For a property that is not a foreclosure, detect if the seller seems in a hurry to sell and use this information to negotiate a better price.
- Evaluate profitability
Sometimes you have to look beyond the purchase price to find a good deal. Two buildings at the same cost will not necessarily generate the same quality of income. You must therefore favor a property that will bring you the most benefits (financial and other) for a lower cost.
Here are some factors you should consider:
- The ratio of net income to the value of the building
- The age of the building, its condition: anticipate major renovations and changes to building construction standards.
- Urban development and the economic revitalization of a sector.
- The anticipated popularity of a sector with a promising clientele.
There are also more sophisticated calculations to quantify the potential profitability of a residential building. To learn more about this, contact me to discuss your project.
Finding good deals is a skill that depends largely on the art of accurately assessing the true value of a building. In this area, nothing beats the expert advice of a broker to assist you in this process!