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60%
Annual Appreciation Opportunity: How To Analyze The Fac |
Greetings from the Los Angeles Real Estate
Wealth Expo! What an amazing event where thousands upon thousands of
real estate investors converge on the convention center to listen to
speakers such as "The Donald" himself as well as Robert .
In addition to the headline speakers, there was plenty of
opportunity for individuals to walk through the exhibit hall and
meet with different vendors and investment groups. Michael and I
were there for both days of the event and got a great opportunity to
talk with hundreds of new and experienced investors alike.
Since this was our first "show", it was quite an eye opener
listening to the investors. Everybody at the show is obviously very
interested in making tremendous returns on their investments. Who
isn't As the people bounced from booth-to-booth-to-booth, they
were getting presented so many different opportunities.
While talking to them, I would invariably get asked about what I
thought about an opportunity being presented by another group. Quite
frankly, I had not analyzed any of them so I could not respond; my
gut feel is there where some great opportunities there and some that
were not so good.
One very common theme that started to
come out was that people where basing their investment decisions on
3 different things: 1) did they "believe" the person they were
talking to, 2) how little money was required "down", and 3) what
kind of appreciation numbers where getting quoted to them.
And then the realization hit me: these investors have no idea how to
even remotely evaluate a project but yet they are ready to buy a
$275,000 house!!! JUMPIN JELLYFISH, THAT iS NUTS! I coached a number
of new investors right on the show room floor about some simple
steps that they could take from their desk to see if things even
remotely made sense.
One project that I heard about
repeatedly sounded very compelling. I probably don't have all the
details correct but here is the gist:
Located in Cape Coral
Preconstruction House With $500 Down Obtain Construction-To-Perm
Loan Appraised Value Is $75K to $100K ABOVE investor purchase price!
If all that makes sense, then how many $500 checks would you write?
For me, I would write a ton of them until the bank quit letting me.
In actuality, I have been aware of this area for quite a while, have
visited there twice, and have considered bringing a project out of
this location. Looking at the appreciation curve below, you see that
the annual appreciation has been amazing and well over 60% at times.
After the LA show, I decided I ought to take a quick peek again to
see if I missed something in my previous visits and also to use it
as an opportunity to show people how to do their own quick analysis.
From a quick look basis, what do we really want to know? The two
things that immediately come to my mind are: 1) Is this market
saturated or likely to be saturated when your house is built; and 2)
Are we really buying this $75K below appraisal?
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