(To read the prior posts regarding Real Estate Investment Reasons select the desired link: 1-2, 4-6, 7-10.)
Number 3
Leveraged Improvements. There is the potential to make improvements to the asset and affect its value. The improvements made are often (when done correctly) create a perceived value greater than the original cost of the improvement. For example I have done some research in a particular neighborhood. I found that houses in this neighborhood with a garage and 3 bedrooms bring a significant amount more in sales price and sell faster than houses that only have a carport and two bedrooms. I’m guessing you may be saying “Duh of course they do.” But the real question is how much more does the 3 bedroom home with a garage bring? Is the amount to upgrade the house worth the increased sales price?
Well my research showed the difference between the two types of homes after subtracting the cost of repairs/improvements, closing costs and commissions had a projected net profit a little over $25,000! In case you haven’t been able to tell I’m very conservative and increase my projected costs by 10-15% and my projected sales price to about 95-96% of the current market price for similar homes.
Now to some $25,000 may not seem like much and to others it may seem like a significant amount. Just to be conservative lets say it takes 6 months to sell the house (instead of the 3 months it currently takes to sell in this neighborhood). What if you set yourself up to do two of these per year? An extra $50,000/year for a few hours of extra work and supervision, is an extra $50,000 worth it to you? That’s obviously an answer you will have to answer yourself.
Whether you think an extra $50,000 is a lot or not, I hope your seeing the main point I’m making. You can easily do something to affect the value of the asset. Try doing that with a stock you own.
More to on the way…
