Welcome to short-term rental riches will discuss investing in real estate but with a specific focus on short-term rentals quick actionable items to acquire manage and scale in your portfolio I’m your host Tim Hubbard.

So I was back in the US recently doing some property searches trying to add to the portfolio did find some fortunately those winds are moving forward but there were a couple others that cashews just so hard to make an offer because I’d bought property in the same area before and Mike this is just these prices are out of control these prices are crazy they’re so high. But does that really matter. It doesn’t actually matter as much if we’re investing for cash flow right but it’s still hard to make that decision and I was listening to another friend’s presentation on the multi family market nationwide recently and he brought up this idea of having past prejudices past ideas impasse perspectives of an area where we maybe knew what the property prices used to be an hour currently look in there but the reality is we can’t we’re not valuing these properties the same we shouldn’t be right the rank grocer different the population grocer different interest rates are different and there’s other options available so all of those things affect our payments right and if you’ve been listening to podcasts for awhile you know that we invest for cash flow hi invest for cash flow long term and so to me and that is the biggest biggest piece of all of my expenses are covered by my income. And I’ve got a loan that’s fixed for a long time 30 years then I feel pretty comfortable moving forward with that property but it’s still hard to make that decision sometimes isn’t right you’re like gosh the same property one year ago was 25 percent last year 30 percent lesser gosh 5 years ago I could this was basically free it’s just it’s hard to do that so there’s one other metric that I want to talk about this week and that is price per square foot so it’s a good metric to compare to similar properties together now it is a slightly complicated metric because there’s not just one average cost per square foot that’s gonna work across the board the reality is is that the cost per square foot the cost to build the property essentially is different everywhere and it’s different for a lot of reasons but I was with a group that I’ve been part of for a while it’s another mastermind group a lot of people with different backgrounds and different businesses there are a lot of real estate investors there and I feel really lucky to be friends with one of the gentleman in there who runs owns manages a portfolio of over $400000000 in real estate a big big one mainly multi family properties and they are building in. Their own properties now because properties have gotten over there at a point where they can build cheaper than they can buy at least in the areas where they are so when there is money to be made developers move and when you can build for less than you can buy. Well then that’s when you see more and more developers going up now the price per square foot so there’s a couple ways you can do this right if I if I’m buying a property I can simply take the cost of the property and divide it by the building or the home size and that would give me a cost per square foot including the land now if I had to give you just like a general ballpark cost per square foot maybe an average and this could be way off depending on what market you’re in I’ll go into that a little detail what can affect this price per square foot but let’s just say 150 to $250 a square foot to build new construction now that wouldn’t include the land right so if you’re buying a home that has a lan included and you’re at $150 square foot that’s that’s pretty good deal course you got to do your research you gotta know what things are selling for in that area so price per square foot I think it can be a really good metric to help compare other properties and I remember a time right after the last recession that would buying properties some that were essentially last than the cost to build now is buying older properties so that doesn’t necessarily mean it’s going to be a good deal right but if you’re in a good market that your coffin and then and the property is in good shape and you’re buying for a less than you think these properties can be built for well then that should help reassure you that should help you pull the trigger and get into a new property now there are places where Detroit for a while you couldn’t give property away for free right certain areas to certain cities that metric isn’t as valuable because that area has maybe fallen off you know they’re losing population so if we’re in a market that we’re comfortable with it’s in a good market that its population’s growing in and it’s got a good. Fundamentals a lot of things we talk about on the show lately and their friendliness and job growth and were able to buy a property that we think is like near construction costs well then that’s gonna be a pretty good deal. Hey I hope you’re finding a ton of value in these bite sized actionable podcast episodes if you want to go deeper though much deeper than we can in the few minutes we have each week we can check out my S. T. R. playbook at rest methods.com clearly my guide my playbook for what I’ve done to acquire multi $0 portfolio of dozens of short terminals and how I currently operate them it’s my best practice guide I know you’ll find a lot of value in it if you want to go deeper thanks for tuning in again and let’s get right back into this week’s episode. I’m gonna give you a couple of places where you can go to try to find what the price per square foot or the new construction cost per square foot is in your area I’ll give you a few of those here shortly but I want to talk about the reason why we can’t just use an average price per square foot our average price per square foot to build because everywhere is different right so take California versus Tennessee for example you’re gonna have different licensing requirements different permitting requirements supply costs could be different so there isn’t one price per square foot just across the board but I think the more you start paying attention to this metric you’ll realize all my gosh the price per square foot for a downtown Manhattan condo versus the price per square foot for a condo in in Lewisville is way different way different right so it is a good metric but it does take a little thinking through a couple other things that can affect the price per square foot to build as well weather so if you look at medigene for example in Colombia where I spent a lot of time it’s really nice weather there they actually don’t even install heaters they don’t need heaters there so that’s going to make their construction costs lower right they don’t need air conditioning and a lot of these places actually allow these brainy places don’t have air conditioning someone wants it just a tad bit cooler well then they install their own but that’s a considerable costs that you could save so you’re comparing one market that didn’t need heavy H. back for example to one that did well you wouldn’t be able to use that metric so it’s better for looking at properties compared to properties in the same area so hopefully that give you a little insight there are a lot of good metrics to evaluate property one of the most common ones we use is cash on cash return right how much cash I’m getting back from my investment. But price per square foot can be helpful for comparing properties in the same area and if you go a little bit further and you discover an average of what the price per square foot to build in your area might be in your finding a property that’s less than that well that should give you the confidence to to move forward on that property that sounds like a good deal right just remember that the market today is much different than it was a long time ago we shouldn’t be underwriting it or that’s another way for saying of valuing a property we should be evaluated that based on information from years ago everything’s different rents are different and they’re going up interest rates are different growth rates are different all of that and building costs are different so user metric do a little exploration and see if you might be able to find what a typical new build price per square foot construction cost is in your area and compare that to some of the properties that you’re looking at that are already built and that’ll that’ll give you a little more confidence so one place you might want to check out to find some of this information what course you can always go to Google you can Google your area and and get some information there but there’s another one called new home source which I think has some good data now again and make sure you’re comparing apples to apples when you’re using this price per square foot metric and if you’re trying to come up with the price per square foot to build remember a custom home you can have a much higher price per square foot than an apartment building right because apartments can have a whole bunch of commies at scale whole bunch apartments in the same place verses one single family home that maybe has higher end finishes so just make sure you’re comparing apples to apples data little deeper into that metric and don’t let your past prejudices or your past ideas or your past perspectives all the real estate market. Fact your decisions today because today is much different than it was 5 years ago I hope that help I hope that wasn’t too confusing and I want to thank you again for joining then and tuning into the podcast I like doing these if you’ve got something that you want us to talk about you can go to S. T. R. riches.com request a topic and I will definitely be looking through all of those I want to make sure that I’m providing some value with this podcast I hope by half if I have if you could leave me a review and really appreciate that and until next time hope you have a wonderful day talk to you soon chop. I want to get on the fast track to financial freedom for short term rentals what all searching the properties you choir you want to make sure that you acquire the right properties I want to give you my you doctor will show you how to do just that there is no charge to my gift to you for being one of our subscribers just go to restmethods.com that’s R E S T methods.com.

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