4 Mistakes Real Estate Investors Should Avoid When Purchasing an Asset

When looking for a real estate asset avoiding these 4 mistakes is essential to finding a great asset. If you pick an asset in the wrong location, it could severely reduce your Return on Invested Capital. Why is location so important? Think about your product. You will be offering a living space to potential tenants. Think through the user experience of your potential tenants. They are looking to meet their basic needs. Is the investment in a location near grocery stores? (food) Is the neighborhood safe or at least an "Upcoming Neighborhood."(safety) Does the building have dedicated parking or street parking, or is it near transit lines? (mobility) Is the apartment well designed, or could you redesign it? (shelter) Is the apartment near a downtown? (community) This article will discuss some of the critical aspects mentioned above when looking for Real Estate.

Not Buying an Asset with A There There

When it comes time to market your rentals, a huge selling point is a cool little area to hang out with shops, restaurants, grocery stores, salons, and more. Google downtown Santa Barbara, Ca or Wilmington, NC, or any other small town. You are looking for a space where people love to convene and hang out. It could simply be a neighborhood street with some simple shops and stores. Now since many people are working from home, it would be nice to walk to a coffee shop, cafe, or another spot to take a break or do some remote work. Well-designed neighborhoods create a community environment that will help drive up your rents and increase the value of your building. Also, look if there are any planned developments near where your potential building sits. Think of the downtown area, gathering street, or development as a central point that pulls the entire neighborhood together. Have you ever driven through endless suburbia that goes on and on with no gathering spot? It has no character. You have found a valuable location if you have a neighborhood with a central place where people like to hang out. Next time you are out and about, look at huge apartment developments. Notice how the developers build gathering spots, retail, shops, or restaurants on their ground floor. They know the importance of creating aspects that promote a strong community feel. When you have a strong community feel, you will have strong demand for your rental product.

Buying an Asset with “NO” Onsite Parking

If you are looking at purchasing an investment property with no onsite parking caution, beware. There are some caveats to this rule for places like New York, where parking and vehicles are fine delicacies. Most people in New York take public transit. It's the super wealthy and businesses that have vehicles. New York aside, parking is essential to your building, especially if you are looking for top dollar rents. That individual who digs your newly designed building may walk because he envisions his BMW getting sideswiped or broken into on the street. He will sleep better at night knowing that his precious ride is secure onsite in a garage or dedicated driveway or parking area. Also, think about a place to store bikes as the electric bike movement is growing and those things are heavy. Walk the neighborhood on foot one day and observe how the local renters travel. Do they walk to work, do they take the bus, do they mostly drive. People have chosen various forms of travel, and knowing the dominant form of travel will inform you of what type of parking you require.

If the building has no onsite parking, does the street have parking, or is it overcrowded with cars? Is there a nearby lot where you could rent some spots for your tenants? Think through the potential parking scenarios and whether or not onsite parking is a deal killer. For me, it's a huge Red Flag because you have no clue how parking on the street will be in 5 0r 10 years as the neighborhood improves and grows.

Buying an Asset in a War Zone

When we purchased a 4-Plex in LA in Mid-City, it was an up-and-coming neighborhood with some small gang activity such as selling drugs. Once in a while, you would hear of a shooting a block away or see a drug bust. It was an eye-opening experience. We installed new gates, garage doors, and I planted ficus hedges which eventually reached 12 feet high. We created an oasis inside the 4 plex, which I called the compound. Security was a priority to me, and I eventually installed cameras all around the property. We never had any incidents on our property, and all our tenants and AirBnB Guests felt super safe except a few.

Safety is a challenging one to tackle sometimes. Possibly you have a super safe neighborhood where you don't require cameras, fences, and enclosed garages, and sometimes you don't. I would avoid crime-ridden neighborhoods with no potential for gentrification in the future as you will always be dealing with issues.

Not Implementing Effective Design

Every building or asset you buy is a potential blank slate. Your budget and your vision will decide how you transform the space. Design is the #1 asset that will differentiate your rental product from everyone else. It's shocking in the Real Estate world how so many individuals employ poor design. Most Real Estate investors execute on poor design because they don't take the time to think through the User Experience. When you nail the User Experience, individuals will pay top of the market rents. Most local property owners around you will wonder in amazement as to how you are commanding such high rents. Some won't believe it. I experienced this myself.

You want a potential tenant who enters your space and thinks, "wow, I would love living here," as soon as they enter the front door. Here is a caveat; your design will not resonate with everyone. For those with whom it resonates, it will create that wow factor. When you design a space correctly, it will leave a lasting impact.

You also want to design a space, so it photographs well. High-quality photographs are essential in today's digital market. Most people seek rentals online through sites like Aprtments.com, zillow.com, and other major apartment listing sites. Also, a 3d software called is becoming popular. It enables you to walk through an apartment visually. High-quality photos of a well-designed space are essential when marketing your rental product.

Closing Thoughts:

Always remember in Real Estate, you are selling a home to potential renters. How can you stand out from the pack and differentiate yourself? Create exceptionally designed spaces on the interior and exterior. Look for the powerful assets in the correct location. Location is everything. One of the best ways to get to know a location is to walk it. Park your car and walk a neighborhood to get a feel for it. Most people are lazy and will drive a neighborhood.

Also, start small when building your Real Estate Empire. Master the above concepts on a 4 plex, then move to an 8 plex, then 16 plex, and upwards. Master the foundational component of any cash-flowing asset, then scale upwards. You will build wealth if you implement this strategy over 10 to 20 years.

Original Article Published at www.RedtoBlackAcademy.com