Deals & Dealmakers What Makes a Property a Great Buy?
Imagine seeing two ideal listings side by side. Now imagine having to choose betweenthem. You ask yourself ‘Which one is the better deal? Are both of them great buys? Or neither one?’ Here, we’ll explore what makes a property a great buy and some hidden factors that you should look out for.
Let’s get the obvious stuff out of the way, like the buildings’ physical characteristics. Thenumber of units, the ceiling heights, the quality of its finishes, the age of its heating and cooling systems, and its structural stability all come into play. However, experienced investors know what lies beyond the surface will impact where your attention—and funds—should ultimately go.
When I review a potential investment, here are some of the less obvious, or hidden,characteristics that I consider:
- A Motivated Seller. Put yourself in the seller’s shoes. What factors aremotivating the sale of the property? If you can understand the context, you’ll havevaluable insight into the deal terms that matter most. For example, a seller facingbankruptcy, a partnership dispute, or other financial distress tends to prioritize thedown payment. Others contexts, like estate sales—especially those with adultchildren looking to get a property off their hands—often indicate eagerness for aquick closing period.
- Low-Visibility Listings. Several variables can cause one listing to receive lowervisibility than another. A broker who is testing out a new geographic area or assettype may use marketing techniques that do not effectively translate to the newmarket. An owner who is seeking to sell a property directly, without a broker,may not have access to as many listing platforms or word of mouth networks.Regardless of the situation, a listing that does not receive exposure to numerousrelevant buyers is less likely to receive competitive offers
- A Neighborhood Ready to Pop. If you have time on your side and an eye fornuance, there are ways to spot evolving neighborhoods before everyone else does. Public infrastructure improvements often correlate with increased property values, as seen in New York City neighborhoods with new subway access. Formalparticipation in neighborhood activity, like a community board or other cityplanning-focused advisory council, provides early insight into where and howthese types of investment are made.
Retail activity also offers clues. New art galleries in a predominantly industrialpart of town can attract other retailers and even new residents to a neighborhood.If all else fails, check with the local servers, store clerks, and residents – they’llknow what’s going on.
- New Land Use Regulations. In most cities, and especially in New York City,land use regulations are complex. Assuming you can get a handle on theseregulations in your target investment area, know that opportunity aboundswhenever there is a shift in zoning. These changes can impact the types ofproperty that can be built in a neighborhood, the size of the properties, and theway that those properties are occupied. It can mean the difference betweencompeting with other owners for a small pool of tenants—or providing a highlyunique occupancy opportunity for a growing tenant category. Rezoningconsistently creates potential for investors of all sizes.
Looking beyond the bricks and mortar gives investors a better chance of gaining a critical edge, even in a competitive market. The property’s physical features will offer a wealth of information, but the context of the sale and the neighborhood can be just as important—if not more so—in finding a great buy.