There are many different investment strategies for making money in real estate, but almost all of them depend on future appreciation for the lion’s share of the profit making! Appreciation is worth big bucks when you’re fortunate enough to own properties during inflationary times! However, when you own real estate during a poor economy (like my state of California is now), you need a technique that makes money without appreciation if you intend to stay in’ business very long. Let me tell you about the strategy I use where my profits are not totally dependent on a appreciate or even a growing economy. It’s called, “The Add-on Value Plan”!

In order to make a property more valuable, the property must have the potential for improvement. Many properties are for sale that don’t have potential for adding on value. When you acquire these kind of properties, all you can do is keep them operating efficiently, collect the most income you can and hope the value increases some day. In other words, after you buy the property, you’re more or less held hostage by the economy. If it’s good, you’ll probably do alright! If it’s in the toilet, like my state is right now, chances are you’ll be in the toilet too – all things being equal.

Investing in this manner is not nearly as profitable nor as safe as using my add-on value strategy! There are many reasons why this is so, but the biggest reason is because you can achieve almost total control over what happens with the property financially. This is made possible by purchasing the right property to begin with. Remember what I said - YOU MUST ACQUIRE PROPERTIES WITH THE POTENTIAL TO ADD ON VALUE. Rundown properties with fix-up potential — And properties that are poorly managed are the best candidates for adding value quickly!

LESS COMPETITION MEANS BETTER BARGAINS

When you set your sights to acquire rundown properties or poorly managed real estate, you are automatically in the “Profit-Making Mode” right from the start! The reason for this is because moat buyers are turned-off by properties that are ugly or rundown and have management problems. This means there’s much less competition for these kind of investments. Naturally less competition allows you to control the purchase price and terms, especially when no one else is making offers when you are! There have been many occasions where my offer was the only offer to purchase a rundown property. Obviously, sellers are receptive to any reasonable offer under these circumstances if they are serious about ridding themselves of their problems.

The following profit: opportunities and conditions exist at nearly all problem properties:

1. LOW PURCHASE PRICE – 20-40% BELOW POTENTIAL MARKET VALUE.
2. MINIMUM CASH DOWN PAYMENT REQUIRED IS NORMAL.
3. LIBERAL SELLER FINANCING FOR ALL OR MOST OF THE MORTGAGE DEBT.
4. PROPERTIES LIKELY TO BE UNDER-PERFORMING (LOW RENTS).
5. PROPERTIES HAVE EXCESSIVE OPERATING EXPENSES.
6. QUITE OFTEN PROPERTIES OCCUPIED BY MARGINAL TENANTS WHO CAN BE REMOVED FOR  HIGHER RENT PAYERS AFTER PROPERTY FIXED-UP