For investors, withstanding the ebbs and flows of the real estate cycle is par for the course. But how do you choose a property that can do the same?
Construction consultant Marco Ganassini has been in the industry for almost 30 years, and says there are four fundamentals to consider when picking a correction-proof property that will attract tenants, mitigate risk, minimize expenditure and, most important of all, provide cash flow.
1. Avoid picking a property solely on price-point – no matter how good a deal it may seem
“The biggest mistake people make is when they chase prices is they look for property in areas where prices have been escalating, especially in the recent past, rather than looking at the fundamental value of the property,” he says. “Primarily, you should be looking for a property that, if and when a correction occurs, you won’t be forced to sell.”
According to Ganassini, there is one principle thing to consider when picking a correction-proof property.
“The whole concept surrounds mitigating risk,” he says. “You’re looking for property that has intrinsic or fundamental value, and we base that on return on investment and cash flow. You want to have some margin of safety.” He continues, “If unforeseen expenses occur, if your revenue stream gets affected, you want to make sure you have the cash flow or capital to cover it. To do that would include not over-leveraging yourself, and finding a property in already excellent condition.”
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