Bob Nelson – Timing

Thanks so much for tuning in to the Real Estate Today podcast. Right now lets discus timing.

Featuring:
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker

Marcia Edwards: We’re going to get schooled a little bit today by the expert and guru in investment property, residential specifically, with Bob. Wanted to talk to you, Bob, about some mistakes you’ve seen people make. One that you mentioned before the microphone came on today was that marketing timing is everything, that you really make your money in investment when you purchase it, not when you sell it. How does that apply to investment property?

Bob Nelson: It’s interesting, there’s an absolute adage. My dad used that, I’ve used it for quite a period of time. It’s what you buy and how you buy it that dictates what you will later sell, and, of course, it’s when you sell is when you’re observing the profit that occurs. So if I have purchased a good property, I’m going to have something called a good property when I turn around and resell it. There’s going to be more than one person trying to buy it, they’re going to up bid the offers that they make and I’m going to be very satisfied that I made good choices in my acquisitions.

Marcia Edwards: Let’s talk about absorbing a mistake in a purchase. So you did not do a great job of negotiating, or you looked over something and said you’d absorb that problem, solve it during your ownership, and you did not. What do you have then for your sales side?

Bob Nelson: Look at it this way. If I paid a little bit too much for a property, it’s much like buying the thing a year from now at the price that it would have been worth at that particular point in time. So I dilute my rate of return but as long as I am in an appreciating property, one that goes up in value, has appeal to tenants, has appeal as far as maintenance and repair is concerned, it’s an attractive asset. Maybe I have paid too much for it, but at least I own the opportunity to make the excess profit that’s going to come as a result of all of those positive things that existed that I overvalued and paid a little bit too much for.

Marcia Edwards: So you observed it but you offset that over time with other benefits that made it worth it to you.

Bob Nelson: Right. However, my rate of return, and rate of return is calculated on an annual basis, I would have to say to my rate of return was very, very low in the first year, potentially even zero if I paid next year’s price for the thing.

Marcia Edwards: So there’s that and then if you could solve the problem during your ownership there’s something that, you didn’t have laundry onsite or something was a hurdle in renting, if you can solve that that could make it so that you don’t have to absorb that challenge.

Bob Nelson: That’s right. That is exactly correct. If it had the potential of being good by some changes and I did those changes, I’ve just offset the overpayment.

Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.