Some may consider me as a “valuable” investor, but I always like to consider myself a “value investor” instead!  That’s because I don’t like to speculate on how high the price will go in a year’s time although being considered “valuable” is, of course, a nice compliment to it.  So, instead of speculating in real estate, I’d prefer looking at the current value of a property, the cash flow it generates (or could generate) and the potential in the land.  What makes a piece of residential real estate valuable is mainly how desirable it is for the person/people who want to live in it. The more desirable the real estate is the more it’s worth and thus, the more value it has. It’s what people are willing to pay to live there.  As mentioned, I do not like to speculate in real estate, since to me, it is like gambling “blindly” … However, in the case of a property on sale in an improving area or an up and coming town or city, the property will likely increase in value in the future because it’ll be a more desirable place to live.  And it is then, after much due diligence, I’d invest in that property in that location for these reasons, and not simply pray and speculate that it will.

“Value” works a bit different on the commercial side of real estate.  For investors who like commercial real estate, there’s good news for you.  For a commercial property, the value is in how much income it’ll produce.  So, it doesn’t matter of the nitty gritty things like how beautiful you can make your property appear or if you have hardwood floor or not … instead, it is important to look at the income it can generate and if you can improve on the income, you can increase the value of the property. It is also very important to know the zoning of your commercial building because it governs what you can or cannot do with the land.  So be careful when it comes to investing in commercial real estate!

Understanding value in real estate is a complex subject and this is just a quick intro to it.  If you’d like to learn more about residential vs commercial real estate investing, feel free to contact us at CE Properties and we’ll be very happy to assist you with your investing endeavours!