Whenever I talk with new real estate investors I ask them about what type of property they’re going to focus on. Most of them haven’t thought about it at all. A few want to go crazy with basement suites or rooming houses (dreaming of the extra cashflow). And if someone actually has a couple properties in mind, they’re often as not enamoured with beautiful looking vacation property or shiny new condos.
The reality is that some of the best real estate investments out there are just ugly. There’s no way you’d want your children to live in it. If it’s ugly when you buy it, even better, because you’ll get a break on price. Add paint and new flooring and you’ve just made a huge improvement (relatively) to the quality of that building.
The reality of cash flow and exit strategy is most buy and hold (or rent to own) folks are best targeting housing for the lower-middle class (or the upper-lower class). There’s always someone to rent it and always someone to buy it. The purchase costs are lower compared to the rent and the margins on what rental increases your renovations will buy you are higher than if you’re buying some 3000 sq ft single family home. The appreciation isn’t always greater, but your ROI and risk will both be better in smaller, simpler properties.
Yes, in a brand new unit you might have fewer renos.No, it’s not worth the new unit markup.
Stop being afraid of renos.
Stop being sucked in by good marketing.
Stop wasting your money on someone else’s new paint.