From the course: Real Estate Analysis Foundations

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Property considerations

Property considerations

- So the first thing I want to talk to you about is the concept of replacement cost. So if you're looking at evaluating an existing asset, that's something that's already there, something that's already built where you're not looking at buying dirt and then trying to build it from the ground up, you always want to think about what's called replacement cost. That is, what would it cost you to build something brand new to replace what it is you're evaluating that is used, that is already there. The reason for that is if it costs you the same or less to get you something new, it might be more worthwhile to actually build something new rather than buying something old because when you buy something old, there may be issues usually involved in having to renovate or there might be other kinds of land mines, things that we're going to discuss later that remove value or add cost. So if you're ever looking at buying an existing asset, you always want to look at what does it cost to replace it…

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