“Is now the time to buy?” That’s the most popular question we receive. Our response is always the same: “If you buy right, it’s always the right time to buy.” There are phases of the economic cycle that place greater importance on buying right. We are in one of those phases. Currently, our economy is in a downtrend, weak and getting weaker. NetGain predicted the turn early on. We thought the economy would improve by year-end. Due to recent events, NetGain now believes the current economic downturn will be longer and deeper than originally anticipated. Not buying right during an economic downtrend punishes an investor more severely than at any other time.

Given the current economy and the media’s propensity to focus on the negative, one could get the feeling we’re heading toward a precipice and about to fall off. If you believe that propaganda, don’t buy! Many industries and companies have come to a precipice and fallen off. Our economy hasn’t. It has maintained a 100% batting average for recovery, and there’s no indication that’s about to change.

Income property also has a 100% batting average for recovery, but not necessarily for investment success. Income property’s continuing recovery from economic downturns is predicated on the fact that it provides non-discretionary products: A place to live, work, and shop. The reason it doesn’t always succeed as an investment is because it’s a business, and as a business, when bought and managed incorrectly, the probabilities are against success. Conversely, because income property offers a 100% recovery rate, it gives you a very high probability for a successful investment.

What does “buying right” mean? Buying right means buying at the right capitalization rate combined with solid due diligence. The result of those actions is the identification and validation of cash flow, line-item operating costs, capital expenditures, and the economic future of the area. This information allows the prospective investor to develop a projected exit strategy and a projected return on investment (ROI). The composite of this information converts emotion into math, and gives the investor a clearer path for a quality decision.

Conclusion

America is founded on and operates as a capitalistic society. Capitalism is an economic system where property is owned by private persons and operated for profit. In a capitalist economy, the market economy decides supply and demand and pricing. As of this date, economic equilibrium remains an unachievable goal. The result: We remain a cyclical economy. Try as it might, government interference will only moderate or exacerbate the cycles. It can’t eliminate them.

Consequently, NetGain regards the number one strategy to buying right to be the due diligence effort. For an example of a comprehensive due diligence effort, review NetGain’s due diligence program: the Economic Valuation System (EVS™). EVS™ identifies the seven critical categories in the due diligence process: Area, location, structural integrity, amenities/functionality, capitalization rate, mortgage, and leverage. These seven categories are supported by 110 key issues which the investor scores and in turn receives a final recommendation. Comprehensive due diligence puts a nice bow around the package for an informed investment decision.