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Considerations When Purchasing an Investment Property: Buyer’s Remorse

When I was working on my MBA at Washington University, I had a finance professor discuss “Buyer’s Remorse.” He described Buyer’s Remorse as a situation where the buyer felt that they had to purchase the goods or services at the price offered without very little inspection or consideration – They did NOT want to “miss out”! The buyer then, after making their purchase, realizes that the investment/purchase would not bring the value that they thought that it would. We’ve all been in the situation where we purchased an investment security (stock) only to see it devalue over time.  Unfortunately, this is a scenario that I’ve also seen happen to property investors.

Purchasing an investment property can be a phenomenally great investment or a financial disaster. It’s really no different than buying a stock. When one purchases a stock, they are working under the assumption that with the information at hand, the value of the stock will increase over time. A great example – people that bought into the stock market in late 2021 and now the value has declined significantly. The same concept can happen with any investment asset. 

When purchasing an investment property, one of two things will happen. The buyer will likely purchase a property that is properly represented and that will provide projected cash flow (income less expenses) over time. The other side of the coin is that the buyer purchases the property and what they anticipated on terms of cash flow does underperforms expectations.

In my 12+ years of working with investment properties, I have seen investors get into the most trouble when they either did not have a professional property inspector and prospective Property Manager view the property prior to the offer. The absence of a visual evaluation invited the opportunity for not knowing potential repairs that might be needed, the neighborhood condition being undesirable, and/or not being able to account financially for the projected expenses.  For the investor that is not a hands-on manager of their property, one of the biggest mistakes that they can make is to purchase a property without having a professional property inspection performed. Many properties can produce cash flow even if extensive repairs are required. However, both the purchase price and the buyer’s wallet need to be prepared to undertake the required repairs/improvements at hand.

At MVPm, I am ALWAYS happy to walk any prospective property with a current or prospective client (or designated Realtor) and their professional property inspector to help determine if the investment is wise at the price offered. I can help with developing cost estimates for required repairs and determining market rents based on the condition of the building and neighborhood. There has been more than one situation where I have steered a client away from purchasing a property (if price negotiations were not achieved) that we would manage because of concerns with the building or the neighborhood. My job at MVPm is to protect your investment and make every attempt to optimize your cash flow.  The first step to helping you achieve your financial goals is to help you avoid experiencing “Buyer’s Remorse.”