In general, we can distinguish four categories of properties with big profit potential (see Figure 3):
A) Properties with
prospects for robust property-income and value increases, which can be classified in three sub-categories:
A.1. Properties about to experience significant rental income and/or value increases due to
strong economic growth of the metropolitan market within which they are located, or other favorable changes in broader macroeconomic forces. I will refer to this category as “properties with
market-driven value-increase potential.”
A.2. Properties about to experience strong rental income and/or value increase
s due to
significant improvements in their locational advantages expected to occur as a result of significant developments in their surrounding area or the broader urban area within which they are located. I will refer to this category as “properties with
development-driven
value-increase potential.”
A.3. Properties that, due to mismanagement, are currently earning an
income well below their true potential, given the advantages of their immediate and broader location. I will refer to these properties as “
mismanaged properties.”
B) Properties that can be bought considerably
below market value, which are referred to hereafter as “
bargain properties”.
1This is an excerpt from the book Profitable Real Estate Investing: A Value Growth Approach by Petros S. Sivitanides, Ph.D.
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