In Stephen Covey’s best-selling book The 7 Habits of Highly Effective People, he recommends that you “begin with the end in mind.” And the same goes for real estate investments. It doesn’t matter if you plan to live in the property, rent it out, or renovate and flip it… before you buy, envision yourself selling it.
Brainstorm all the potential concerns your future buyer could have – starting with anything that made you question your own decision to buy. Is the property on a noisy street? Does the basement flood once in a while? What condition is the roof in? Is the layout of the house good for the average family? Is it in an up-and-coming neighborhood? Are other properties in the area comparable in value?
If there is anything about the place that makes you hesitate – anything that can’t be fixed easily and cost effectively – you can be sure your future buyers will have the same problems with it. So forget it and move on to the next deal.
I lost money in a hot market on a condo purchase in Toronto because I didn’t follow that rule. The unit I bought was on the second floor – and because it was right above the entrance, it was the only one in the building that did not have a deck. Identical units on higher floors were going for the same price. But I used my unit’s “faults” to negotiate a better purchase price, so I thought I had gotten a good deal. Five years later, when I went to cash out, units exactly like mine but with small decks on higher floors were selling for over $20,000 more than I got for mine.
You are making an investment only if there is a reasonable probability that you will be able to make money when you sell. Buy every property with that in mind.[Ed. Note: Buy with the end in mind – and you’ll make the best possible real estate deals.
And be sure to check out the website of Internet Money Club member and real estate investor Julie Broad. In eight years, Julie and her husband have built a multimillion-dollar real estate portfolio in their spare time with minimal cash resources. They publish a free monthly newsletter to help other rookie real estate investors achieve their investment goals. Check it out here.]