Investment Property: Part 2

Investment Property: Part 2

Bargain-hunters, listen up! I've got some deals for you that you just can't refuse. Just like the location and size of the property play a key role in selling your investment property, so too does the price.

This article will walk you through what kind of asset each individual location type commands and provide some guidance on how to find a good deal in each geographical area. Let's start with...

Rural Properties:

These vary a lot in price. In some areas they will be very cheap. In others, not so much. Here are some rough guidelines:

Most rural properties are in the $100,000 - $150,000 range. This is the mid-range of rural properties (not including commercial properties). The price will vary based on the location, size, condition and utility hookups that come with it. Let's say you have a choice at this price range between a 30-acre property and an 80-acre property; obviously you would choose the larger one because it will hold more value.

Rural properties will only hold more value if you can find and maintain the land. That said, this is a relatively easy area to find properties in at a low price because of the popularity of rural living. You can always find a buyer who wants to live out of the city and cut down trees. Even though these people may be dumb to some people's eyes, they are making money whether they are buying or selling.

Tom Landry was right when he said, "The most dangerous part of real estate is when you think you have found a good deal."

"The hardest part about any business is finding customers. The next hardest is finding a good location. And the next hardest is finding a good employee."

That's why we're taking the time to make sure that you have good locations for your investment properties.

When you do find a rural property, make sure to verify the utility hookups. The property may seem cheap, but keep in mind that no water or power can be very expensive in the long run. This also requires that you know what kind of housing code (or lack thereof) exists in your area.

If you decide to buy land, be prepared to deal with using it sometimes because people are always looking for places to build their homes. So be prepared to have lots of meetings with people who want to build on your land. That's a headache, but it's a headache that comes with a price.

Commercial Properties:

Now let's discuss commercial properties. You will find that commercial property costs vary most drastically by location and size. The 80-acre property in the middle of nowhere would cost the same (or less) than the 30-acre property if you were in an agricultural area. Years ago where I grew up, many farmers bought rural land to add onto their existing farms (40 acres or so) and built new buildings on the land since they had easy access to it (just 20 minutes outside Dallas). Thus, I've made that my litmus test for commercial property.

I'm going to define commercial as 5 acres or more of land under one roof and that can be self-sufficient. If you have an 80-acre farm in an agricultural area, it would not be self-sufficient because you would need to travel 20 minutes to get to the nearest house or business.

If you had the same 80 acres in a rural area near your home, then yes, it would be self-sufficient because you live nearby and can manage the property yourself.

The larger the property, the more expensive it becomes per acre. It also gets harder to find because there aren't that many 80-acre tracts of land that are sitting in an urban area (why would a farmer want to be near so many people?).

Unfortunately for investors, finding commercial properties when they are priced right can be difficult because there are several people involved in selling a piece of real estate. Thus, you have to make friends with the seller and their agent while also keeping your mouth shut about buying it.

You'll find that searching for commercial properties on the internet is the fastest way to find them. Sites such as www.homesite.com and www.realtytrac.com are good places to start your search for commercial property, but you need to remember that no matter what they say, the site does not always know what's available in your area so it may take a bit of research to find opportunities.

If you can't seem to get a good price on a commercially zoned property in an urban area, hunt around a local construction site or construction company and ask people there if they know any surplus land that could be used for building purposes. Often, construction workers and managers will know about these things.

Commercial properties command a price that varies between $10 and $50 per square foot. Again, this price is dependent on your local market. I'm sure a retail store in New York City would have to charge more than one in a rural area because of the fact that it took quite a bit of money to build the store.

The most important thing to remember about commercial properties is that there are two components that make up the cost of a building. There's the cost of the building itself, and then there's the land it sits on. When you buy commercial property, you must pay for both items when it comes time to sell. You could end up paying far more than you think if you don't check the price of land in your area, or if you think all that matters is buying a building and then renting it out.

If a commercial property is going to stay in your area for a long time, you'll have to do the work of maintaining it. The bigger the building, the more maintenance you'll need to do.

(Yes, I want my buildings to be renovated and spruced up if they're going to last for over 20 years)

For that reason, it's important that you check out leasing costs and first-year rent. Commercial property would be very different if it were being used for rental purposes instead of office purposes; what if it was used by a company with employees who need minimal upkeep?

You also have to take into consideration the value of your land when you're looking at commercial properties or homes.

Conclusion:

It is important to know what you are looking for when you're looking for a home. You may find that the housing market where you live, or that you have previously thought of, may not be the best investment for your situation. No matter where you live, the key factor is to look at it from a long-term perspective and ensure that it fits your needs not only today, but in the future as well.

http://www.cymmetrics.com/2011/04/its-your-market-not-someones.html - The truth about property prices in Sydney's suburbs

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