The Value of Investing in Below Market Value Properties

The Value of Investing in Below Market Value Properties

Anyone who has invested in real estate knows that one of the best ways to earn a healthy return on your investment is to invest in a property that is below market value.

By purchasing a property that is below market value you are setting yourself up to earn a healthy return on the property’s equity down the road, however in order for this to happen, you will also need to spend some money to upgrade it.

Not only will this improve the property’s value, in many cases if you buy the right property you will be able to split the dwelling into two units allowing you rent out the investment property for nearly double the price.

With this type of monthly income, you will be able to quickly recover any of your initial costs to upgrade the property and continue to earn rental income for years to come while the property appreciates in value.

This win-win scenario is the same investment strategy we use at ARTOL when we enter into an investment partnership.

In fact, at ARTOL our strategy is to Buy, Renovate, Refinance, Rent and Repeat (BRRRR). In other words, we find and purchase properties below market value, renovate them and, whenever possible, add a secondary unit and refinance for its full market value after renovations, then hold and rent the property for cash flow, mortgage paydown and appreciation. The funds obtained after refinancing a property are then used to purchase another one before we repeat the process.

If this sounds like an investment strategy you’d like to be a part of it’s important to first understand why buying an investment property below market value is a worthwhile investment.

For starters, in general investing in real estate has historically generated healthy returns, however how much you pay for the property and how much it increases in value can vary greatly.

One way to ensure you make a healthy return on your investment is to invest in a property that is below market value. This can help generate equity right out of the gate, however it’s extremely important to spend the right amount of money to upgrade it otherwise the property value may begin to plateau or even decrease in value.

Far too often investors believe they can buy low and make a quick buck renting it. While this might work for a short period of time, in the long term the property will need major repairs, which will hinder its ability to appreciate in value, so it’s important that when you buy a property below market value you are prepared to invest a significant sum of money to upgrade it.

At ARTOL, we do all of this for you, from finding the right property to purchase, to coordinating the renovations, to managing the property after it is rented out. In other words, when you invest with us you get a hands-free investment where we do all the leg work.

In fact, throughout the whole process, you may receive cash flow from the property and at the end of the deal you recover your initial investment plus 50 percent of the remaining profits from the sale. In some of the deals, you may not need to wait for the end to recover your initial investment.

Want to learn more? Reach out to us with any residential real estate investment questions or sign up for our newsletter to learn more about real estate investing opportunities in Durham.

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