Successful real estate investors train themselves how to look at property through the eyes of an investor, not the eyes of the consumer. Essentially, that means they have the ability to consider and evaluate real estate investments without getting emotionally attached to them.
The first time I walked through a potential investment property you should have seen the expression on my face. I was visualizing what it would be like to live in that particular property and since it would be in a low or moderate income neighborhood and in need of repair, the image that I was seeing was not very appealing.
It took awhile for me to get used to this sort of thing and I had to repeatedly say to myself “I’m not going to live here”. After the real estate investment property “shock” wore off, I was able to see with a different set of eyes. That was the most difficult hurdle to jump over and I bet you experience the same thing.
I then started viewing these properties as opportunities instead of headaches and was looking to find places that needed more work rather than less. It makes going to the table to negotiate that much more in my favor since there tends to be more work needed before tenants could move in.
A prime example is one of my more recent purchases in Albuquerque. I flew over there with a list of 15 potential properties to evaluate and ended up getting a great deal on 4-plex that needed about $10000-$15000 in fixing up. I offered under asking price at $170,000 and the seller accepted. Similar multi-family dwellings were selling around $200,000 so I knew even if I had to put in $15,000, I’d still end up ahead. Prior to the offer I calculated a $500 positive cash flow each month once all four units were rented out. The numbers worked so I pulled the trigger.
There is a big difference between how you look at investment property and how you look at a property you plan on buying for yourself. The property you’re buying to live in needs to suit your personal preferences and lifestyle. When you’re buying a property as an investment, it’s all about the numbers and not so much the looks. There’s nothing a new coat of paint and carpet can do to change the appearance of a rundown apartment building. All those minor things just take a little extra cash which you can write off as part of the investment.
So what will it cost and how much revenue will generate? It’s an easy formula to figure this out. If the numbers work, you buy the property. If they don’t work, you don’t buy. Just make sure your “investor eyes” are seeing clearly and you don’t get caught up in an emotional battle.