SS127: What is Functional Obsolescence in Real Estate скачать в хорошем качестве

SS127: What is Functional Obsolescence in Real Estate

Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing What is Functional Obsolescence in Real Estate. The term functional obsolescence can be attributed to many different industries and products. Usually referring to an item that was previously useful but, now has been replaced by newer, better, technology. In this episode, Charles discusses functional obsolescence as it pertains to real estate; what it is, and why it is important to be aware of. TALKING POINTS ➡ When investing into real estate, investors should be aware of how functional obsolescence will influence the value of their property; now, and in the future. ➡ What is Functional Obsolescence? o Within the realm of real estate, functional obsolescence is the decrease of functionality or desire due to an outdated design, features, deterioration or external factors that are typically outside of the control of any one property owner. o One other example would be; cell phones, computers or TVs; as they age, they have more functional obsolescence and their values rapidly decrease. ➡ What are some examples of functional obsolescence: o Busy roads o Physical deterioration – poor property condition - disrepair o Small bedrooms or small bathrooms; or a lack of them o An unfunctional floor plan: bathrooms on one level and bedrooms on another; requirement to enter a bedroom to get to another room; poor design o Low ceilings o No garage or small driveway o External noise pollution, high crime o Property is out of place ➡ There are 3 main types of functional obsolescence in real estate 1. Incurable functional obsolescence. 2. Curable functional obsolescence. Curable functional obsolescence includes issues that can be fixed. Depedning on the property, these could be easier fixes to more complex ones; it all depends on the property. Removing walls in a $600,000 house to open the kitchen and add an island might cost $30,000; but, the value might increase to $750,000 and the investment would be well worth it. Or there is additional land next to the driveway to expand it and accommodate additional vehicles. Or there are old windows at the property; but they are easily replaced to increase efficiency, appeal and value. 3. o A 3rd form of functional obsolescence that should also be mentioned is superadequacy. This is where the property was over-improved and the over-improvement adds no additional value or the over-improvement is too expensive to maintain. Since we talk a lot here about commercial real estate; mainly 5+ unit apartment complexes; it is important to note 2 other types of functional obsolescence that are mainly discussed within the realm of commercial real estate. o Economic obsolescence o Physical obsolescence ➡ Functional obsolescence is an issue that all real estate investors should be aware of before purchasing a property. ➡ Some investors will convince themselves they are getting a deal when they see a property that is much less expensive when compared to the others in the neighborhood since there is some level of functional obsolescence. In the end however, this might not be that much of a deal when they go to sell it since the deal they got when they bought it; they might need to offer to the person who buys it from them. ➡ This happened to me in 2010, I was flipping a house in New England and I thought it was a great deal; good neighborhood, good price etc. The issue was, no basement. In New England, nearly every property has a basement. In order to sell it, I had to offer a discount to the buyers; a similar discount to what I received when I purchased it. Connect with the Global Investors Show, Charles Carillo and Harborside Partners: ◾ Setup a FREE 30 Minute Strategy Call with Charles: http://ScheduleCharles.com ◾ Learn How To Invest In Real Estate: https://www.SyndicationSuperstars.com/ ◾ FREE Passive Investing Guide: http://www.HSPguide.com ◾ Join Our Weekly Email Newsletter: http://www.HSPsignup.com ◾ Passively Invest in Real Estate: http://www.InvestHSP.com ◾ Global Investors Web Page: http://GlobalInvestorsPodcast.com/ ◾ Global Investors Facebook:   / globalinvestorspodcast   ◾ Global Investors Instagram:   / globalinvestorspodcast   ◾ Charles Carillo LinkedIn:   / charleskcarillo   ◾ Foreign Investing in US Real Estate Facebook Group:   / foreigninvestinginusrealestate   #globalinvestors #CharlesCarillo #FunctionalObsolescence