“What are the main metrics a property investor uses to determine if the property is worth purchasing or not?”
Now some of the main metrics that I look at personally, first one is the 3 Ls: location, location, location. Location, location, location is huge. Now in my own portfolio I favor downtown properties. I like properties downtown because in most cities, downtown is always good. It’s where the jobs are. It’s where the people are. There’s three major things you got to look at with property or real estate in general. Number one is industry. Are there local jobs? Second one is net migration. Are people moving into the area or moving out? The third one is transportation. Can people move into that area? If you have a small rental property, is there a bus stop? Maybe you got a piece of land. Is there a highway going by the land? If you can hit these fundamentals, those are really important.
Another metric I’ll look at is what’s the zoning. If the property has a certain zoning, can you make it into a higher density zoning, can you add value by zoning, rezoning, subdividing, all those types of things? A big one for me when I’m acquiring buildings is dollars per square foot. Some people say that’s the intrinsic value of the property. In my market, we’re buying properties for $100 a square foot. We’re selling them for $200 a square foot. Now if you are purchasing properties, you want to buy in the sub-construction price. What that means is can you buy it cheaper than it is to build. If you’re buying in the sub-construction price, in some markets in the United States right now you can buy properties for $50 or $25 a square foot. You can’t even build the property for that price. It’s a pretty good time to buy in some American markets.
Other things I’ll look at is school zones. Are there schools nearby, and which schools, because the better the school, typically more people want to live in the good school zones. The last thing that I’d look for, we got our fundamentals here, we got our dollars per square foot, we got our zoning. School zone’s the last thing. Here’s liquidity. What liquidity means is how quickly, how fast, would that property sell if I needed to sell it. There’s certain properties and certain types of property that sell fast no matter what. There’s other properties that will never sell no matter what. I like to buy properties that are liquid. What that means is if it’s homes, it’s your homes in good areas with good school zones, good neighborhoods. If you’re buying a commercial property or somewhere for more industrial, commercial purposes, is that a high demand area that people want? That’s the name of the game.
I hoped this helped you a little bit with the main metrics of buying and selling property. Respect the grind. Like, share, comment and post your real estate investing questions in the comments below.