Appreciation is only one piece of the return, and negotiation, seller terms, loan paydown, and income all shape what a property earns over time.
If the only return you’re counting on is your property being worth more next year, that strategy will never work. A true return on investment comes from several places at once, and that holds in a good market or a bad one.
Right now, I’m hearing a lot of urgency and a lot of fear-based talk. In the last 30 days, I bought a property I consider one of the best deals I’ve ever made, and today’s market is why it happened. My team is also still receiving offers on luxury homes and even commercial properties.
The biggest difference I see is that many people are waiting around and hoping something changes. The ones who come out ahead work through the issue instead. They find ways to create value, get the property presented correctly, and attract the market rather than chase it down.
I’ve watched this market rise and fall over 20 years, buying at the height and at the very bottom. Every property I’ve kept has pointed me back to the same factors, and they apply whether you’re buying, selling, or making any kind of real estate investment.
Today’s market allows stronger purchase negotiation. Homes along the Wasatch Front are currently sitting about 58 days on the market, with inventory roughly 20% higher. With those conditions, buyers have room to negotiate strongly and work out pricing that fits the current environment.
“Market terms are just as important as price.”
Ask the seller for concessions. More buyers are starting to ask for concessions. Closing costs, improvements, and other adjustments are all fair to request.
On one recent deal, the numbers simply didn’t make sense in the current market, so the owner decided to carry the contract. The terms we offered were attractive enough that we sold the property for more than the list price.
Every payment builds forced savings. Each mortgage payment reduces what I owe, which essentially turns the property into a forced bank account. I had paid down two duplexes far enough that I could borrow from them when an opportunity came along. Principal reduction is what made my commercial property purchase possible.
Look for ways to force equity. Return on investment goes well beyond the purchase price. The more useful question is whether you can force equity into the property.
At one small townhome property, we recently renovated, made improvements, and forced equity. Another property had very low rents, and raising them increased its value. With any property, I’m asking what its highest and best use is and how to create it.
Income should outpace operating expenses. Beyond the forced savings of a loan paydown, look for opportunities to earn additional income from the property. The question I always ask is whether I’m getting cash flow over time after all of my operating expenses.
Give appreciation enough time to work. Long-term appreciation is the factor people forget most often, and the reality is that you can’t outperform time. If you buy a property and expect a return within a year, you haven’t held it long enough.
When someone tells me the number they want to make, I tell them they’ll get there. It may simply take two, three, five, seven, or 10 years, depending on where the market sits. Historically, time keeps working in your favor as the market continues to rise.
Your property can open new doors. An asset isn’t only something to keep and hold. It can also become the foundation for your next move. I once traded a duplex through a 1031 exchange. The two duplexes I’d paid down worked the same way, giving me the borrowing power to buy that commercial property.
Return on investment comes down to far more than time. If you’re considering buying, selling, or another investment, look at the micro market rather than just the macro. Build a strategic plan to negotiate both price and terms, since the terms you negotiate matter as much as the price. I believe this is one of the most amazing markets, and it gives buyers and sellers a different kind of opportunity.
If you want to know what your next move should be, I’d be glad to help you build a plan around your goals. Call or text me at 801-285-0521, email me at Justin@JustinUdy.com, or visit justinudy.com. I look forward to helping you out.
