At the end of the day, it’s all about the numbers for real estate investors. However, those numbers can look very different from deal to deal even if each of the deals in question is profitable. In this month’s Panel in Print, three of our Resident Experts get into the details about the hard numbers, the specific markets, and the important fine print they factored in for specific, successful deals.
Pamela J. Goodwin: “The Power Broker”
“I have a property under contract right now for $500. It’s a vacant 2,864 square-foot fast food building with a drive-thru. A lot of people are looking for second-generation built-out properties since they are quicker to open and more cost effective. I’ve had several offers from people already, asking if I will flip it to them.
“Most people do not even realize it is an option to say, ‘Okay, I’m going to get a property under contract and flip it to a national retailer or restaurant,’ but it is completely possible and it is one of the best ways to make big profits quickly in commercial investing. You truly can put a piece of commercial property under contract for a relatively minimal amount, then sell it the same day for a much higher price. My preference, however, is to do a five- or 10-year ground lease [on this property].”
Ben Rao: “The Entrepreneur”
“About three years ago, I bought two duplexes for just about $8,000 out of pocket for closing costs and $5,000 cash to the seller. I had gotten the lead a few months earlier. They were in a great area but the properties were trashed: water damage, mushrooms growing because it was so damp, lots of leftover stuff from an old tenant. I only wanted them at the time if the seller would hold the note [seller-finance so that there were no immediate purchase costs] but she did not want to do that. A few months later, my phone rang and the seller agreed to hold the note while I repaired the properties and put tenants in them. Then I went back and refinanced at a five-percent interest rate and now I have an amazing equity position in two cash-flowing properties.”
Abhi Golhar: “The Connector”
“Not that long ago, I bought a little boarded-up house in a booming pocket in south Atlanta. It wasn’t designed well: It was really wide and really tight. This type of property will sit on the market, even in hot areas, because of its layout. As real estate investors, we’re always looking for an opportunity to add value. If you can make improvements and change the flow of the house by knocking down walls and opening up the space, you have the potential to get a long-term renter or have buyers in a bidding war ready to pay a high sales price.
“Why? Because you’ve made the home more comfortable and that makes people want to stay. For our little house, we’re going to completely adjust the layout in that house, get rid of the weird drop zone where you get stuck figuring out whether to go up into the family room or down into the kitchen, and that house is going to be worth so much more than what we paid in one of the hottest neighborhoods in the city.”