Buy Investment Property Without Seeing It
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Buying Investment Property Sight Unseen
Why Consider Buying Without a Visit?
Purchasing investment property without seeing it firsthand may seem unconventional, but the key lies in ensuring the numbers work in your favor.
A Numbers Game
Investing in real estate often prioritizes figures over physical inspections. A savvy investor in California once made offers on a hundred MLS listings at a time, each 25% below the asking price. Although he hadn’t visited these properties, an "inspection and approval" clause allowed him to withdraw if necessary. This tactic helped him identify motivated sellers efficiently.
This example highlights that with the right contract clauses, making an offer without viewing the property is feasible. If a property doesn’t match the seller's claims, you can back out with minimal loss. So, why might you skip the visit?
Prioritizing Numbers Over Visits
The main reason to bypass a visit is time, especially if the property is distant. Why spend time traveling if the price doesn't align with your goals? Price and terms matter most. While you'll likely visit eventually, starting with the numbers is essential.
For income properties, begin by verifying the current cash flow. Obtain income figures from the past 12 months. Consider potential income from rent increases or additions like vending machines, but base your offer on present income.
Verify all listed expenses. If any seem surprisingly low, they might be inaccurate. Use your estimates for any questionable numbers.
Once you calculate the net operating income, apply the appropriate capitalization rate to determine the property's value. If you're unfamiliar with this, seek assistance, but understanding cap rates is crucial. This is indeed a numbers game.
Calculate loan payments with guidance from your banker to determine cash flow. Then, calculate your cash-on-cash return by dividing the cash flow by your investment.
Making an Informed Offer
When the numbers align, confidently make an offer. Inspections will reveal any issues impacting cash flow. You can renegotiate if problems arise, provided your offer included inspection contingencies. And at this point, you can visit the property if you're ready to proceed.
By focusing on numbers first, you streamline your investment process and target viable opportunities with assurance.
You can find the original non-AI version of this article here: Buy Investment Property Without Seeing It.
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