Survey

A recent survey taken by Net Gain Real Estate (NGRE) indicated a love/hate relationship with our Economic Valuation System (EVS)™. The love side was emboldened with many comments like: “this is the greatest”, “it’s invaluable”, etc. On the hate side we heard: “it’s hard to use”, “it’s too complicated”, etc.

Why

NGRE determined early on that one of several critical ingredients to successful real estate
investing is a detailed due diligence process. Hence, in June 2006 when the Web site was
launched, it included a comprehensive due diligence methodology called the Economic Valuation System (EVS)™.

EVS™ includes 111 characteristics vital to a successful real estate investment. It is so essential to a successful real estate investment program that NGRE decided to devote this essay to the use and explanation of EVS™.

Use

EVS™ is simple to use. First, you need to subscribe (there is no financial cost). After subscribing, two approaches are available. Approach one is to use the 111 characteristics NGRE has identified as an informative resource to keep your attention focused on the key elements associated with value. Approach two is the proactive use of EVS. You post the relevant score to each of the characteristics. The system then adds and computes your score into a specific buy/hold/sell recommendation that you can print as a PDF.

Explanation

EVS™ identifies seven categories crucial to evaluating the present and future value of an income property. They are: area, location, structural integrity, amenities, capitalization rate, financing, and leverage. Each category then lists their relevant characteristics. It is each of these characteristics that are scored. This methodology provides the real estate buyer or owner the ability to conduct an orderly investigation of the subject property. The results are a more efficient use of time spent on research and an increase in the probability for a successful investment decision. Following is a summary of the characteristics in the seven EVS™ categories.

Area:

Selecting the right area is your first and most crucial decision. Making a mistake is fatal.
Research all factors carefully.

• Look for growth in an area as measured by migration plus per capita earnings, retail sales,
  and bank deposits.
• Evaluate the competitiveness of your proposed real estate purchase by studying figures for permits and buildings under construction.
• Job creation is the anchor to an area.
• High employment spurs growth and real estate profits.
• If taxes and adverse legislation are oppressive, it’s harder to make money in real estate.
• A good climate attracts people and businesses.
• Well-located and maintained roads, airports, shopping centers, and recreational facilities
  enhance an area.

Location:

The more convenience you give people, the more they will want to rent or lease your square
feet.

• They’re paying the rent for a location that’s easy to reach.
• Research carefully. If you make a mistake on location, you’ll be locked into it forever-or
  until you can find a buyer who will make the same mistake.
• Retrace the footsteps of your lessees (clients), traveling to-and-from residential areas and office complexes.
• Visualize the effect of changing seasons and weather conditions on the property.
• Make daytime, nighttime, weekday, and weekend visits to the property.
• Be aware of local zoning and its impact.

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