Historically, the majority of residential investment involves the acquisition of deflated run-down assets that can be rehabilitated for either a quick sale or rental income. Through the over-produced magic of “reality” television, more and more new investors are showing up to the game with wide eyes and wild dreams. The true reality is that as demand increases for these properties and supply remains stagnant, price increases and profits plummet. However, human nature keeps unsophisticated investors bidding up prices for the sake of “winning” at the detriment to their own profits. Thankfully, as savvy investors, we know the economic principle of substitution, which holds that a prudent investor would pay no more for an income-producing property than it would cost to build or
purchase a similar property. So, why then would an investor pay $300,000 for a property with a monthly net income of $2,000 when that investor could achieve the net income with a $100,000 investment? The answer: ignorance of the existence of the $100,000 property. Here are a few of those properties just waiting to be added to your portfolio: MANAGEDRECREATIONAL COMMUNITIES Because most tiny homes are built in factories, the build cost is minimal. While the above example is for the Taj Mahal of tiny homes, most quality tiny homes that can be used for investment purposes in recreational communities cost around $80,000. What is included in the tiny home? Everything you would
60 | think realty magazine :: july 2020
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