First Rental Property

Catchy subject title, eh?

It is better than yesterday’s…I know.

Maximizing your profits with real estate investing is honestly, a very simple thing to do. However, it may not seem simple at first.

Possibly, you have heard about the concept I am about to describe in one way, shape or form. If so, fantastic. If not, no worries. I will explain the concept in detail and give you practical examples to further illustrate the concept.

The number one way in which you can maximize your profit with Real Estate is through:

The Principal of Progression

This is a very cool concept. Basically, this concept means that a house of lesser value, can be influenced by houses of greater value.

In English, this means, if you own the smallest house on a street, that is surrounded by other, bigger, nicer homes on the street, the value of your small house will be affected in an upward manner, and you will realize appreciation of this home as a result, through The Principal of Progression.

It is always a good idea to find the smallest house on a street, and buy it. However, don’t get fooled here, as you also have to be purchasing this home in an area where there is a demand for housing.

You don’t want to buy the biggest, nicest house on the street, as The Principal of Progression will not work here. Since this house is the biggest and the best already, there are no other homes in the immediate area, that will influence the upward trend in value of this home.

Here is a practical example of The Principal of Progression at work.

In one of my earlier articles, I talked about my first rental property, and all of the ‘mistakes’ that I had made with this particular purchase.

What I did not realize at the time, was that The Principal of Progression was dramatically influencing the value of this home.

This rental property of mine was a 1,400 square foot townhouse that was surrounded by semi detached and detached homes. I purchased this townhouse for $250,990 CAD straight off of the plans from the builder. The other, larger homes, surrounding my townhouse were selling for double the price. As such, there were many of these larger semi-detached and detached homes selling for $500,000 CAD.

Since my townhouse was of lesser value, but surrounded by more expensive, larger homes, it realized a healthy appreciation in price over a very short period of time. This is the principal of progression at work.

Today, I was visiting with a Condominium Builder as I am looking to trade up my principal residence. As such, when I was examining the floor plans and prices of the units available, I was only paying attention to the units of lesser value. In this particular condo project, there are units selling for 3 times the value of the least expensive units.

For example, the units that I was considering were valued at $245,000 CAD.
There are other units in the building selling today for $800,000 CAD.

There is no doubt in my mind that The Principal of Progression will be at work again here, and as a result, the units of lesser value will be worth more in a given period of time, as the higher priced units will bring up the value of the lower priced units.

When you are purchasing a home, whether it is your own home to live in or a rental property, keep in mind the principal of progression, and the effect that it can have on the value of your property.

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