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Have you discovered a lucrative real estate deal abroad?
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Israeli investors love reality and dream of a particularly high return, but before entering into such a deal it is very worthwhile to ask the appropriate questions.
Roi Maudi, CEO of VALORE warns against buying a cat in a sack, even if it smells of duty
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Apartments
Real Estate
Roi Meudi, guest column
Tuesday, 03 August 2021, 11:36 Updated: 12:31
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Some people plan their family vacation for months on end, but it's surprising to see how when it comes to real estate investing they let intuition, or rather the tempting idea of buying below market price, lead them. Ridiculous to see that buying below market price has become synonymous For a good deal without hesitation, through statements like "the money in real estate is made by buying" or "if you buy at the market price you are a sucker" and ending with "if you bought at the market price then where is the profit?".
This may be the new "truth" in the digital discourse and even outside it, but such a purchase should at the end of the day be another parameter in the basket of considerations, and not the individual consideration that must be taken when making the investment decision.
Many deals on behalf of blue-and-white investors in the US market boast a buy below market price, but are they really bought below market price at the end of the day?
In order to understand, one has to wonder what exactly the market price is.
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Home in Jacksonville, Florida.
Have you been offered below the market price?
Doubt (Photo: ShutterStock)
What is a market price anyway?
It is important to remember that raising value is not buying below the market price.
Many are confused by this.
After all, if you bought a neglected house with a significant need for improvement in the amount of $ 70,000, when well-kept homes in the same area without the need for improvement are sold for $ 100,000, it does not mean that you bought below the market price.
Market price is the price the market is willing to pay for the same product, often confusing that price with appraisals.
If we take an analogy from the world of vehicles, suppose we bought a vehicle that does not have high demand, and we open the Levy Yitzhak price list (equivalent to appraisals).
We will find that this vehicle is worth NIS 80,000, and when we advertise the vehicle for sale in Hand 2, for example, we will find at best that the calls we receive will reflect offers of NIS 50,000-60,000.
The price list does not reflect the market price on paper but in practice.
The same goes for real estate.
It is important to remember that raising value is not buying below the market price. Many are confused by this. After all, if you bought a neglected house with a significant need for improvement in the amount of $ 70,000, when well-kept homes in the same area without the need for improvement are sold for $ 100,000, it does not mean that you bought below the market price. Even if thanks to your talent, knowledge or connections you know how to generate an increase in value in attractive amounts that will leave you with a nice profit line, there is no connection to buying below the market price. It does not come in place, but goes hand in hand towards raising the value of the property and turning it from a neglected property into an attractive and attractive property.
An increase in the value of a good market property is a much more important parameter than buying below the market price. Suppose we bought a property below the market price - the property is worth $ 100,000 and bought it at a 20% discount ($ 80,000 without the need for improvement. In the area we bought there is no significant increase in value, if at all. This means that we earned $ 20,000 after 3 years).
We'll take a second property, which we bought for the same $ 100,000.
This property is in an area that has experienced value increases of about 12% per year, after about three years the property will be worth $ 140,492.
That means we made $ 40,492, even though we bought the property at market price.
So could it be that money is not just in Kenya?
Is buying below market price relevant to any investment strategy?
This discourse is so ingrained that it is almost the default question of every investor even before setting out.
If we as buyers buy properties for the purpose of a long investment, let’s say 15-20 years, the weight that buying has below the market price is marginal.
Imagine you were buying real estate in the country about two decades ago at the market price or even a little above, surely today you would not look back and complain.
The second example is multifamily complexes. If we know we are buying properties that need improvement, The market price has a much less heavy weight in the decision, and it is certainly not a mandatory clause in order to define a deal as a good deal.
Before you buy a TV you consult, right?
So on a few in real estate transactions, and on a few overseas (Photo: ShutterStock)
When is it legitimate for an asset to be sold below market price?
Marketers are starting to use this statement just to attract investors inside.
So what are the legitimate reasons for this for you?
Divorce, financial crisis of the seller or his family, inherited property, auctions, off-market properties (referring to properties that are reached through connections and not advertised anywhere).
Illegal reasons for selling a property "below the market price" are varied and include: "Corona transactions", transactions in undesirable areas with few offers, property with significant problems that are not economically correct, properties with a history of liens and foreclosures, area infrastructure problem, problematic population, Properties with various problems such as construction anomalies, non-standard construction and more.
Ask the right questions
Roi Meudi (Photo: Yachz)
It is important that they reveal to you the reasons for the decline and if they do not do so, the right questions must be asked (what does it mean "below the market price?" What market price? On what are the numbers based?).
It is important to be suspicious and consult as much as possible - after all, in today's era we consult about buying any electrical device that costs several hundred shekels.
So make a procedure - consult before real estate investing with someone who understands the investments you want to make. If you buy at the market price, it is important that you understand the deal and understand where its profitability comes from and if there is an increase in value how it is created? the market price is considered a total of synonyms increase the value of the property you will create an investment, because if there are multiple offers on the property, probably you pay exactly what the property is worth - the market price. all that remains is to understand that not all that glitters gold.
* Roy ever is the CEO " To VALORE, a company that specializes in multi-family investments in the United States
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