1. Path of Progress is key to finding a great deal. It must be in the path of progress. A good example here in Utah is what is going on in the tech industry with Silicon Slopes. They continue to build tech companies and buildings in what was once a small town, Lehi UT. In the desert west of I15 and Lehi Facebook has built a 5,000-person data center. The land between I15 and a small town called Cedar Fort is all in the path of progress. Another example of the Path of Progress is Urban redevelopment as people move from the suburbs back into cities and they are targeting, “turning Neighborhoods.” These neighborhoods once undesirable due to crime are now having a resurgence. You must find property in the Path of Progress to have long term profitability.
2. Water side property, lakes, rivers, oceans, etc. Any real estate nearby water will increase in value over time.
3. Hillside property or in a tall building anywhere, people love to be King of the hill and love the views. Once again, these type properties will increase in value.
4. Anytime one can combine these first three types of properties in the path of progress a person will increase value rapidly. Kula is a place I have looked at in Maui that is a good example of this combination. Kula is in the mountains, overlooking water and in the path of progress.
5. The property must have positive cashflow creating income for the business and each investors portfolio.
6. Each asset should have the possibility of depreciation and allow for maximum tax benefits against profitable income.
7. Purchase real estate with equity and making sure that an asset has value and/or will increase in value. For example, this equity can be from tenants paying off the mortgage of real estate owned.
8. Appreciation due to a property being in the path of progress or the market conditions allowing for a property to increase in value. Appreciation can come from value add, forced appreciation, decreased expenses, or increased rents.
9. Leverage needs to be proper and wise, I built a multimillion-dollar business in my 20’s using leverage. It was proper, not wise, and the crash wiped that business out. All investors must make sure they are wise with leverage. Don’t stack your debt. I was missing the cashflow to carry my business if the appreciation didn’t happen. I only had equity and hope of appreciation as it went down in value. Make sure you have cashflow, equity, and appreciation. Hope isn’t a strategy. If a person had 300K it would be smart to leverage the money over multiple properties by putting 25% down on different properties. Diversify risk over multiple properties. Don’t put all the money in one investment property.
In summary when I am looking for a deal if I can flip it and/or rent it either way, I have profit and security. Once again combining all 9 aspects of finding an ideal property will make all the difference in the world. That is why one of my rules is knowing that the deal is good whether I keep it or flip it and that the property has cashflow and equity. These are the factors needed in order to find a good deal. Profitability and security the greatest needs of a real estate investor are satisfied by these 9 aspects of the ideal investment.