First things first. Friday was April Fool’s Day. Justin is NOT moving to Milton, and there’s still no Costco being built in Milton. 🙂
However, we did get quite a few of you. Nothing to be ashamed of… next year you have full permission to come back on me. Warning: I play for keeps on April Fool’s Day!
So today there’s a list of 20 properties, including a triplex that’s been listed four times in the last eight years. Maybe it’s coincidence… but that seems like a yellow flag to me.
One of the ways you come up with a value on an income-producing investment is through measurement of the NET income after expenses. So we’ll talk about this measurement and why most sellers will artificially inflate their NET number by ignoring certain expenses like vacancy/credit loss, and property upkeep.
Another way to increase value of a home could be to increase the income, which would raise the NET number. For example, are the rents lower than they could be? You might be able to raise the rents and increase the value of the property. Could you put a coin-operated laundry to add income? If you replaced the appliances for $1,000, could you raise the rent by $100/month? Some of the best investors I know are masters of vision – what “could” this be once I add something to it?
The relation between net income and the value of a property is called the “cap rate“. On paper in 2016, anything above a 5% cap rate is pretty good. The property on Oak would be one to explore a little deeper for most investors.
You know what’s entertaining? When a For Sale By Owner panics because of the crazy 2016 market. Today, we’ll talk about a property that dramatically under-listed their home, and then turned around and raised the price by $40,000. It might still be underpriced.
The cherry on top of today’s episode is the home on Wettlaufer. I hope they change the square footage, because there’s a big difference between 3,000+ and 3,300+ square feet. Especially when properties in that range are adjusting at $100/square foot (or more).