Ugly Properties Make Better Investments

August 31st, 2010 · 4 Comments · Buying or Selling Your Property, Rental Property

This evening I went to look at a 6 plex with some potential investors. It didn’t go very well. They didn’t like the place. I have to admit that it wasn’t very pretty. One of the apartments smelled like cats. A LOT.

Still I like the numbers on this building, the rest is cosmetics. Ask anyone in property management what the nicest high end place can look like after a few months with a bad tenant in it. And how fast we can clean it up! That place has to be ready to rent by the next month.

If you’re like me, you’ve seen the signs of bad management over and over again.

Signs of Bad Property Management

  1. Rental Units Not Prepared For Renting – In this market there is really no better bad tenant attractor than a dirty, unrenovated place. If the place makes you ask “Who would live here?” then you know it’s bad management underfoot.
  2. Bad Attitude – Claims of bad area, bad tenants it’s all a smoke screen for the real problem…bad management.
  3. Vacancy – Just the inevitable result of more bad property management. Two of six of the apartments we saw were vacant. That’s a 33% vacancy rate.
  4. High Turnover – Well that just goes along with crappy apartments and more bad management.

As an investor, signs of bad management should be a sign of good profits to come. With buildings you can’t change the location, you can’t really change the layouts of the apartments, but you sure can change the management. It’s not rocket science to figure out that your apartments should be clean and painted and livable by decent people’s standards if you want to rent them. Area is not an excuse. A viable strategy I have used in bad areas is to simply have the best place around. That way you’ll get the best people that are available. All I have to do is convince a finite amount of decent people to live in a great place in a metropolitan area with millions of people to choose from.

In today’s market investors are desperate for a return. The facts are that returns are hard to come by, they come in unexpected places and you’ll have to work for them. The numbers don’t lie.

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4 Comments so far ↓

  • Mr. Cheap

    I’m always amazed at people’s inability to see past surface problems. When I bought my condo, a couple of friends were HORRIFIED. A quick reno and neither could believe it was the same place (one told me it look a MILLION times better).

    I get depressed when people are looking to buy real estate and they comment on the paint colours (what could be easier than repainting a place? The colour of the walls is the last thing that should be a make / break part of the decision).

    • Rachelle

      Like I said I’ve walked into places that smelled like cats and required 2 bins to empty out the junk, a couple broken doors etc. By the next week the place was ready to rent.

      Want to buy a nice 6 plex in Mississauga for around $625,000 🙂 We can transform those apartments into little condos with ensuite laundry and clean the place up for about $40,000 and rent the one beds for $1000 and $1100 for the 2 beds. Then we can split the buildings up… it has 2 addresses and sell them separately for even more 🙂

  • Albert

    Rachelle,
    Can you recommend a real estate broker who
    specializes in income properties in the GTA especially if they have a nack for identifying ugly
    properties that have potential.
    Thank-you.