How To Get A Good Real Estate Investing Deal In A Poor Market
We are in a real estate market that continues getting worse and house prices that continue going down
. More and more people need to sell their houses or lose them to an already saturated market.
We are likely to continue seeing this trend for a while, which means house prices will continue going down.
So how can you make sure that the house you buy today will hold its value until you sell?
Most home owners looking to sell their houses now understand that the value of their house is quite unstable.
They understand the value of their house may be much lower than it was just two months ago, and that the prices continue to go down.
They also know that they can no longer sell their house at market value any more.
Too many houses are sitting in the market that you can almost certainly negotiate the price down on most properties even if the asking price is 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.
For example if you buy properties to fix and sell, it means you could end up holding them for as long as six months.
How much value will the house lose in this time?
You are likely to end up paying too much for your houses if you do not answer this question.
If your business model is to wholesale houses, you still need to answer this question. How much will your buyer need to discount the property when they sell? After all, if you do not leave enough money in the deal for your wholesale buyer to make money, you cannot sell a property as a wholesale deal.
Previously, most investors have been quite comfortable buying houses at 70 cents to the dollar minus repairs. There are real estate investors who are still using these numbers. Today, 60% minus repairs barely scratches the surface.
If you fix them and hold them as rentals, these numbers could work perfectly for you.
If you buy, fix and sell, you do need to get a better deal to cover your holding costs and the price drop within that time. If you buy to fix and sell, you must have better numbers that will cover your holding costs and the decrease in price within that time. Do not forget you will have to give a discount when you sell.
These days, a discount of as much as 15% to 20% is not uncommon. Will you have enough to make a profit out of that?
Motivated sellers understand this, and I successfully use it to negotiate prices lower. Of course, the discounted dollar figures they give you might look big. Real estate investors work with percentages, not dollar figures.
I explain the numbers as percentages and it easy for them to see that margin is really quite small. This way they understand you are not taking advantage of them, and you end up buying at a price that makes you a profit.
by: Simon Machcria
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