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How To Identify A Good Deal For Real Estate Investing
| The real estate market has continued to go down and house prices continue to take a dive. At the same time more and more people are looking to sell their homes to offload them into an already overcrowded market. We are likely to continue seeing this trend for a while, which means house prices will continue going down. So how do you identify a good deal that will hold its value until you sell? Most home owners looking to sell their houses are getting more and more realistic about the value of their house. They do realize that prices continue to go down, and that their house may not be worth what it was just two months ago. They also know that they can no longer sell their house at market value any more. There are so many houses sitting out there that you are almost guaranteed to successfully negotiate your price down, even if the asking price is already well below market value. Motivated sellers know that you must also give a discount when you sell your properties, so they do understand the discount they give you will be passed on. If you buy, fix and sell for instances, you can end up holding your houses for as long as 6 months. How much will you lose in value in this time? If you do not answer this question before you buy, you are likely to end up paying too much for your investment properties. If you flip properties as a wholesale investor, you also have to think about the same question. How much extra discount will your investor buyer need in order for the property to remain profitable for him? In reality, you cannot wholesale houses unless you leave enough money for the wholesale buyer to make money. Lots of investors have previously been quite comfortable buying houses at 70 cents on the dollar less repairs. Some real estate investors still use these numbers. Today, 60% minus repairs barely scratches the surface. If you buy properties to hold as rentals, then these numbers can work perfectly. If you fix properties to sell them on retail, then your numbers must cater for long holding costs and associated price drop. Naturally you should cater for the discount you will give when you sell! It is not uncommon to give a discount of 15% to 20% when you sell. Will you have enough to make a profit out of that? I find it very easy to explain these things to a motivated seller when buying a property. Of course they think that they are giving you say $20,000 discount. Real estate investors work with percentages, not dollar figures. Once I explain my numbers in percentages, they can easily see how it small my margin really is. They end up understanding that you are not taking advantage of them, and you end up getting a deal that can make you profits. |
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Are you a real estate investor who is negotiating yourself out of profits because you buy too low in this market? Get more in-depth advice from our real estate education section, and find out how an interactive real estate website can drastically improve your business and profits.
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