Also, as for investing in property, I've read some stuff and I think I've gotten a good idea of what kind of returns to expect and what kinds of properties to invest in.
One resource I was using explained that there are three categories of property -- Class A, Class B, and Class C, which correlate to "cream of the crop," "okay," and "broken down dump" respectively. Class C properties produce a greater return than Class B, which produces a greater return than Class A, due to the higher risk involved.
A chart I saw indicated that the best investment properties for maximizing your cap rate were Class C commercial properties in a city's CBD (basically the financial district). Those properties earned an average cap rate of around 10% to 14%, depending on the city. So a $1 million property would be expected to earn $100,000 to $140,000 per year in rents at standard occupancy levels.
What I'm wondering is, would it be possible to find Class C or Class B properties that are located in good locations but have become run down, purchase them at a low price due to their status, renovate them into Class A buildings, and then sell them?
The way I see it, that would be a pretty good deal from an investment standpoint:
>buy a relatively cheap building
>earn relatively high cap rate
>renovate it
>earn higher rent on now high quality building
>sell for more than you buy
The only problems I can see with that plan are that you have to chose properties that are in a relatively good area (no one would want to buy a building in the middle of nowhere even if it is high quality), the fact that you have to put money and effort into renovating it (and make sure that the money put into renovating it isn't larger than the extra amount that you sell it for), and the fact that it's riskier than just buying an already top-tier building.
But is it a good idea overall, and assuming it is carried out with proper knowledge?