3 ways to avoid over paying for investment properties in todays market.

Value add is probably the most played out saying in real estate, yet we still say it. But why? Rates are near historic lows (and can only go up) and prices are also at near all-time highs. So, what gives? Here are a few proven areas to look at when trying to find a deal in today’s market.

-??????Toilets! Yes, toilets… We all know that the amount of income a property makes determine its value. Often times older assets will still have toilets that use 3 or even 4 gallons per flush. Modern toilets use between .8 and 1.2 generally. When combined with low flow fixtures this can often save 20% on the water cost. On a large asset this can increase value by millions of dollars. Keep an eye on all of the utility costs and look for areas where you may be able to find savings.

-??????Loss to lease: Buy assets with under market rents for immediate upside. This one is a given, but often times you can find assets that have rents that have not kept up with the current market. This has been referred to as “mom and pop quantitative easing.” Sometimes this can be as easy as renewing the lease at market rate with no capital expenditures required.

-??????Know your numbers! Underwriting the deal isn’t just for your banker. In larger multifamily deals this is actually easier. Why? The bank is forking over a lot of money and they want to make sure the deal is solid. They double check your numbers and make sure you are underwriting with too much optimism. The smaller the asset is, the less the lender looks at the deal and the more they look at the borrower. This can get you in hot water fast. If you are buying outside of your local market, make sure to do your homework.