- Joined
- Dec 14, 2013
- Messages
- 980
So do you think it is a good investment or not?
Not sure I follow you completely, dumb it down please
All depends on your investment thesis... (sorry for being a bit late to game here) Maybe 5% per year compounded growth is justified. But for smaller properties you are really bound by the fact that you are making a macro play. Even if you increase the NOI 20% it doesn't mean your property value will increase by 20%. For smaller properties, you may be able to do a substantial value enhancement if you buy a real dog and are able to bring up to average or a bit better than average and get out. With a trade background this is a possibility but limited by your capital or time availability which are big drags on return.
Macro play means that you buy an asset plop in tenants do very little improvement and hope the economy just lifts the value of your rents and property value. As smaller property, few options to forcibly increase value and cost of exit is about 4.5% of gross value whereas a larger building it is closer to 3%. So lots of disadvantages with smaller investments unfortunately.