Real estate investment can be profitable, especially if someone can locate undervalued properties. These properties might give a good return on investments either by rent return or by appreciating the value itself. Here are a few strategies to find some undervalued properties to invest in.
Understand market dynamics
Real estate developer Dov Hertz advises, “The key to finding undervalued properties is to understand the local real estate market. Study market trends, historical data, and economic indicators to identify a place likely to start growing in property value. Look for neighborhoods currently revitalizing or with much room for solid growth.”
Visit real estate websites
Real estate-based online platforms could be very resourceful in knowing if any properties are undervalued. Websites and applications include Realtor.com, Zillow, and Redfin, which provide the capability to search for a property based on various criteria. Set alerts based on the search criteria.
Attend the foreclosure sales and auctions
Properties put up for auctions and those offered for sale through foreclosure are perfect sources for undervalued properties. With most properties sold below the market price, one can save a lot. However, caution is needed because properties at this venue may require extensive repairs or might come with other underlying issues.
Network with professionals in the real estate sector
Dov Hertz has always said, “Real estate negotiations are personal.” Build relationships with real estate agents, brokers, and other professionals to increase your possibility of getting some of the best deals, both off-market and on any other type of privileged information. Attend local real estate events regularly, join any available investment groups, and network with other professionals on social media.
Search for distressed properties
Purchasing those properties in distress or properties under excellent repairs would usually have a price lower than their actual market rates. Look out for properties on the market for some time or those classified as “fixer-uppers.” Be willing to pay a little more for renovation to add value.
Look at off-market properties
Some sellers may even actively pursue the marketing of off-market properties. These types of deals are much harder to find, but in more circumstances, they offer the best negotiation opportunities. An example of these kinds of deals may involve networking with local property owners and people who are in the know about the sale of real estate.
Examine comparable sales
A Comparative Market Analysis (CMA) will help establish a fair market price for the subject property. Look for those properties that are selling under their CMA value because of the unique conditions of their sellers or market conditions. This is an indication of a property being undervalued.
Determine the potential for rent
Look out for rental income potential— properties in high-demand rental markets can also have other unique features that make tenants pay more for them in terms of rental income, thus being more valuable as an investment.
Be patient and hardworking
Finding undervalued property is a game of patience and effort. It takes some time for one to land a proper opportunity, and you, therefore, have to wait without investing in a hurry. One should conduct appropriate due diligence before getting into a specific property to make sure that it meets all the expectations you have for an investment. Dov Hertz says, “A real estate transaction is like walking through a minefield. Those who are successful are able to sidestep and pivot when necessary. Those who don’t end up stepping on the mine and blowing it up.”
Finding an undervalued property that can be turned into an investment typically involves a mix of market knowledge, networking, and plain old diligence. But remember, every real estate investment involves a level of risk, so please do your due diligence and check with the necessary professionals.