The 4 Key Benefits To Buying Revenue Properties With Low Income 💰⁉️

Investing in revenue properties is probably the most popular way to build wealth and secure financial stability and maybe even an early retirement… While high-income properties may seem like the obvious choice, Properties being sold with low-income offer unique advantages that savvy and experienced investors should consider. Too often we meet with buyers looking to buy revenue generating properties such as triplexes quadruplexes asking only about how much profit is being made on a monthly basis and forgetting about the long term goal. Here are the 4 key benefits of buying a revenue property with low income:

1. Lower Purchase Price and Entry Barriers:
One of the most significant advantages of investing in properties with lower income is the lower purchase price and entry barriers that come with lower revenue. In Quebec’s real estate market, high-income properties often come with hefty price tags that may deter first-time investors or simply cost too much for those with limited capital. On the other hand, low-income properties are typically more affordable, making them accessible to a broader range of investors. Usually when pricing revenue property we use an income multiplier ( 17 or 18 times the revenue), so the lower the revenue, the lower the asking price, no matter how large the revenue potential may be! By investing in a low-income property, you can enter the real estate market with less capital upfront. This lower barrier to entry allows you to start building your investment portfolio sooner and take advantage of potential appreciation in property values over time.

2. Less Competition and Higher Potential for Negotiation:
High-income properties in Quebec tend to attract more attention from investors seeking immediate cash flow. This increased demand can drive up prices and make it challenging to negotiate favorable terms. In contrast, low-income properties often have less competition, giving you more negotiating power and flexibility in the purchasing process. They typically sit on the market for longer even though already reasonably priced.. which means when the time comes you can negotiate a better deal for yourself! Additionally, sellers of low-income properties may be more motivated to close the deal quickly, providing opportunities for favorable terms or concessions.

3. Stable Tenant Base and Lower Vacancy Risk:
Properties with low revenue are often due to stable tenants that have been there for a long time, particularly in areas with high rental demand. While high-income properties may experience fluctuations in occupancy due to market conditions or tenant turnover. Buying a property that has stable tenants, although offering lower revenue might allow you to know that for X amount of years you will be generating X revenue, allowing you to work on the building until one of the tenant leaves and then allowing you to have the benefit of the work you put into the building and generate even more revenue! Buying with a stable tenant base, you can reduce the risk of vacancy and ensure a steady stream of rental income at the very beggining. This stability can provide peace of mind and financial security, especially during economic downturns or periods of market uncertainty.

4. Potential for Long-Term Appreciation and Value:
While high-income properties may offer immediate cash flow, low-income properties can provide long-term appreciation and value. Buying a property that does not generate as much ROI immediately usually means the price of purchase is lower, once you are able to turn over tenants and increase your yearly revenue, you build equity quicker and the property appreciates much faster as well! As urban areas grow and evolve, buildings that once suffered from low-income may experience revitalization and gentrification, leading to increased property values over time.
Being an investor does not only mean that you must immediately line your pockets with cash in year one. The smart way of investing can also be finding a diamond in the rough and bringing it back to life… Losing $500/Month for the first 2-3 years and then generating a profit of $1,500 per month for the next 20 still makes sense in the long run. Making a decision based on the short term is not always the best idea. In conclusion we believe that young investors looking to buy long term properties shouldn’t always be looking at the ROI in year one but instead, look at the potential certain properties have.
If you are looking to buy revenue property, give us a call!