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Deals & Dealmakers

What Makes a Property a Great Buy?

By James Nelson

Imagine seeing two ideal listings side by side. Now imagine having to choose between
them. 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. The
number 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:
 

  1. A Motivated Seller. Put yourself in the seller’s shoes. What factors are
    motivating the sale of the property? If you can understand the context, you’ll have
    valuable insight into the deal terms that matter most. For example, a seller facing
    bankruptcy, a partnership dispute, or other financial distress tends to prioritize the
    down payment. Others contexts, like estate sales—especially those with adult
    children looking to get a property off their hands—often indicate eagerness for a
    quick closing period.
  2. Low-Visibility Listings. Several variables can cause one listing to receive lower
    visibility than another. A broker who is testing out a new geographic area or asset
    type may use marketing techniques that do not effectively translate to the new
    market. 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 numerous
    relevant buyers is less likely to receive competitive offers
  3. A Neighborhood Ready to Pop. If you have time on your side and an eye for
    nuance, 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. Formal
    participation in neighborhood activity, like a community board or other city
    planning-focused advisory council, provides early insight into where and how
    these types of investment are made.

Retail activity also offers clues. New art galleries in a predominantly industrial
part 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’ll
know what’s going on.

  1. 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 these
    regulations in your target investment area, know that opportunity abounds
    whenever there is a shift in zoning. These changes can impact the types of
    property that can be built in a neighborhood, the size of the properties, and the
    way that those properties are occupied. It can mean the difference between
    competing with other owners for a small pool of tenants—or providing a highly
    unique occupancy opportunity for a growing tenant category. Rezoning
    consistently 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.

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