Don't Get Spaced Out of Real Estate Profits

Okay, sounds good so far. But before you bite, check the facts.

Watch Out for Errors of Measurement

Appraisers, sales agents, sellers, and property tax assessors mismeasure properties all the time. In fact, sellers or realty agents often pull their square footage figures from property tax records. Yet in many areas of the country, property tax records are notoriously inaccurate. (That's one reason why the fine print on the realtor's property description flyers might say, "Data believed to be from reliable sources, but not warranted.") 

Recently, an appraiser reported the square footage of one of my properties at 1,370 square feet, when it actually comes close to 1,750 square feet. The property tax records of another house I owned showed 2,460 square feet. But the house actually totaled over 3,200 square feet because the tax assessor had never adjusted his figures to reflect an 800-square-foot addition actually made by the previous owners 10 years earlier. 

Of course, errors may also plague the reported square footages of comparable properties. The comp price per square foot could exceed or fall below the figures quoted.

Remember Too, All Space Doesn't Count Equally

The square footage of an attic that's been converted into a spare bedroom isn't worth as much as the square footage of the main house. A finished basement of 800 square feet isn't the equivalent of an 800-square-foot second story that's fully integrated into the house. 

Don't compare houses or apartment units only in size; also compare the quality and livability of the finished space.

Remember this point not only when you're bidding on a property but also when you're making improvements. Too many amateur renovators create space through ill-conceived conversions that are cheapened by low ceilings, rooms without windows, weird interior traffic patterns or floor plans, and no ductwork for heat or air conditioning. To add the most value to a property, integrate the new space within the existing property in such a way that it blends smoothly and harmoniously.

Unappealing conversions and additions leave buyers or potential tenants with an overpowering negative impression. Quantity rarely pays off as well as quality!  

So don't get "spaced out" and believe that a property you are buying is a bargain when it isn't. More importantly, make sure that every square foot of every investment property you buy will work its hardest to generate profits for you.