Again, let’s look at the project I talked about at the start of this article. Let’s say you’re comparing it against a similar opportunity; another multi-family in the same neighborhood but which requires less work. You’d take that opportunity over the fixer-upper unless the second one offered a considerably higher rate of return. But how much higher?
To starting investors I always offer the same advice: In this area err on the side of caution. A project that you can get done is infinitely better than one that has you burned out by the time you’re halfway through it. Find something in your comfort range that offers some decent numbers, get it done, then move on to a more challenging (and hopefully more profitable) project the next time around.
Conclusion:
Analysis is part art, part science. Take a look at the other topics in this section for more ideas on evaluating investments.
The Author: Chris Smith is a real estate investor, founder of an online reference for investors and real estate professionals and has published articles in Corporate Finance Magazine, Euromoney, and the Business Journal Network. More about Chris Smith.
