Almost everyone says the three most important words in real estate are Location, Location, Location. They are not. As an investor looking to buy a rental property and to make money on it from Day 1, the three most important words are: Location, Condition, Price. Let us briefly discuss each one so you will know why you should take that maxim with a grain of salt.
Yes, the property must be in a location that your prospective tenants will find attractive. If you want to rent to students, being close to college campuses makes sense. If you want to rent to young professionals, then close to good transport, close to places of employment, and close to stores, restaurants and, say, public parks makes sense. So Location is important, but it is not the only criterion savvy investors base their decisions on.
This is another critical issue. Who cares what the location is if the property has mold, termites, old aluminum wiring that keeps failing, the HVAC system needs to be replaced, and the roof leaks. How much money and time will it take to get this "perfectly located" property ready to rent out? Condition matters as much a location.
Even if the condition is not as dire as just described, would a young professional want to live in a home with poor curb appeal, old fashioned decor or worn carpets. No matter how low the price, a young professional couple want a home they can invite their colleagues into for dinner or a social weekend, not one that will embarrass them. Condition is important and can affect how easy it is to attract your target market. If you are a "fix and flip" investor how much fixing will be needed, and at what cost, to make the initial investment worthwhile so you make your profit?
Over-paying for a good location and great condition breaks one of the basic rules of savvy investing. If you pay over the market value, then it will take longer for rental income to become a profit center, or you will make less profit when you flip it. Every property has a market value based on location, condition, size, age, etc.
Some sellers are very motivated and may take a low offer because they need to liquidate, or they inherited the property and just want to get the cash. Finding a very motivated seller who will sell at an attractive price is a great way to maximize profit.
Location, Condition, Price make a lot of sense when it comes to a real estate shorthand rule. Location, location, location is just too limited. When you find your property, and are ready to buy, please just click here to contact us. We look forward to working with you.