Hugh and Ryan vs. ChatGPT - August 2023
In the context of commercial real estate, explain the phrase “You make your money when you buy”.
"What does the phrase “you make your money when you buy” mean? It means that when you buy commercial real estate, you don’t really know if you made a good move. You will find out later, years later. Then, if it was a good investment, it will be because you bought smart, i.e., you didn’t pay for it, and you knew what the risk factors were and the conditions of the property, and your projections as to financial performance were on track with what actually happened, and then you’ll say hell yeah I bought smart and I made my money when I bought it. Thank you!"
"You make your money when you buy. To me, that means doing your due diligence. Making prudent decisions. Knowing when to walk away from a deal. It means getting a property at a good price with good financing and making sure the math works. Doing all that is more important than selling or operating the property or managing the property because if you buy wrong, you spend too much money, or you get in over your head on your financing, that’s a recipe for disaster. (Knowing that you never really have all the answers or have accounted for all risk) But, if you buy right or buy smart, that’s a recipe for success. So, to me, that’s what “you make your money when you buy” means."
The phrase "you make your money when you buy" in commercial real estate emphasizes that an investment's success is determined by its initial purchase. Getting a property at a fair price builds instant equity and shields against market fluctuations. Timing matters: buying in a buyer's market and a desirable location with strong demand improves profitability. A property in good condition saves on immediate repairs. Thorough research and negotiation skills prevent unforeseen expenses and secure better terms. A clear exit strategy guides decisions for optimal returns. Essentially, the value gained from a well-priced, strategically chosen property forms the foundation for future profits, highlighting the significance of the purchasing phase in commercial real estate investment.