Get the most out of your RE investment by CREATING VALUE

[Robert Gorra]

To make the most money you can in real estate, you need to create value.  Take a property worth $50,000 and make it worth $250,000.  It's being done all around you, every day.  To get in on it, all you need to have is relationships, the corner stone to any real estate business.  Short term relationships are ok if you're buying a house to live in, but the long term relationships are what you need if you want to retire early on your income properties, move to Florida, and have your yacht out back.  Create value by buying right, using pro contractors that are fair (yes, they are out there), and flip (for a quick buck) or hold for rent (refi & appreciation).  Very important: you must know ahead of time whether the end game is flip or hold, to make the most out of your investment.

Top three ways I create value

1) Always negotiate the purchase price.  However, don't just ask for a lower price, you need to build a case and "argue" it to the seller.

2) Always look for a strong rent ratio.  Albeit, this only applies for rentals (I love rentals).  Take your all-in cost and divide it by your annual gross rent.  Shoot for 15% in Philadelphia and 20% outside the city.  So if your rental should get $1,200 per month after rehab. just multiply that by 12 to get $14,400 annually, then divide the $14,400 into the all-in cost (total purch. costs + rehab expense + holding costs + construction insurance + cost of debt).  

3) Take a harder look at the ugliest properties.  Many investors won't even bother looking at properties that need structural repairs (foundation cracks), has a squatter, or rests in a neighborhood they themselves wouldn't live in.  If you do your homework and have the right relationships, these properties won't scare you away, and can earn you the highest returns. 

BP community, what do you think?