Why Two Identical Properties Can Produce Completely Different Returns

This article is presented by Onshore. A situation that often catches new real estate investors off guard is a significant discrepancy in return on investment (ROI) between what seem like two identical properties. The scenario typically goes like this: The investor did all the necessary research and purchased, for example, a unit in a multifamily development. The investment starts generating returns; the investor is then in a position to expand their portfolio and invest in another unit in the same development or a comparable unit in the same area: same purchase price, same rent. And yet the outcome is totally different; the second property isn’t generating the same returns. Where did the investor go wrong? The answer is that they didn’t pay enough attention to how the second property was different from the first in terms of financial structuring. Just because two properties physically look the same/similar enough doesn’t mean they’ll be treated the same way financially for loan or tax purposes. While researching the potential of a specific property should always be a priority, you’re not off the hook the second time around just because you “already have one just like this.” As we’l...