The technique helps investors quickly assess the short-term, medium-term, and long-term profitability of a property. By using this tool, investors can gain valuable insight into the potential success or failure of investments in residential and commercial properties.
The 3x3 Technique involves three criteria: capital investment, rate of return, and risk. Capital investment looks at the initial amount of money the investor needs to put down to acquire the property. Rate of return is the return on the investment - this can include rental income, appreciation, and other factors. Lastly, risk is the inherent uncertainty of the investment - it is essential for investors to understand the various risks associated with any potential investment.
When evaluating a property, investors can use the 3x3 technique to break down the investment into nine sections. This approach allows investors to quickly assess the merits of an investment opportunity. To evaluate a property, investors analyze the amount needed for the capital investment and rate of return for each successive year for three years. This helps investors identify properties that can realize higher rates of return over time, while also being mindful of the associated risks.
By using the 3x3 Technique, investors can quickly determine the profitability of any property. It also gives investors an understanding of the types of investments they should be making. Following this technique, investors are better equipped to make informed investments while minimizing their risk.
The 3x3 Technique is a useful tool for real estate investors to identify and evaluate potential investments. It helps investors assess the short-term, medium-term, and long-term profitability of a property, by breaking down the investment into nine sections. It looks at the three criteria - capital investment, rate of return, and risk - to help investors quickly understand the merits of any residential or commercial property. By taking the time to understand the associated risks for each investment, investors can make more informed decisions while minimizing their risk. The 3x3 Technique is a great way for investors to increase their chances of success in the real estate market.
This article was contributed on Dec 12, 2023