How to Buy Houses at the Right Price for Real Estate Investing
In real estate investing, buy low sell high is a very common expression. As simple as it may sound, it is not always easy to buy houses at the right price.
Whether you plan to sell your houses immediately or keep them for cash flow, your buying price must be low enough to make you profits.
So how do you get the best buying price when buying your properties?
A few years ago, it was not un-usual to buy a house at 80 cents on the dollar and wholesale it for a tidy profit because the market supported it. In fact, you always expected the price of the house to go up within a few months.
Currently, when you buy a house, you should expect the price to go down. Almost every home owner has lost some equity in the home in the last one year.
This means that when you buy a house, you must consider this fact. Wholesale properties currently go for 60 to 65 cents on the dollar minus repairs.
Also, tenants have become more choosy since there are more houses to chose from, and are likely to go for a house with a pristine rehab job.
This has made rental prices more competitive.
Even though there are more houses for sale than any recent past, you must let the seller know these facts.
So whenever I am talking to a seller, I let them know that even though it seems to them like they are leaving a lot of money on the table, I have to spend my time and money fixing it up, then I have to sell at a deep discount.
And chances are that I might be unable to sell it at all in the current market.
I let them know that it might take months before I can sell it in which time most of my profits will be gone. When most sellers understand these facts, most of them relax.
I like to make this clear before I can make an offer. Even though motivated sellers really need to sell their houses, they do not like to feel like they are being taken advantage of.
My offer then easily gets accepted even though it is low.
Why is it necessary to explain all this?
Since you have to sell houses lower than we used to a few years ago, you must buy them lower to make money.
You must do this also if you buy properties on terms, such as lease options. You must remember that even though the price for properties that you buy on terms is usually higher, it must still be low enough to cater for the facts above.
This way, you can still sell it at a profit in a year or two even if the market remains poor.
Simon Macharia - About Author:
Find out how an automated real estate investing website can attract, pre-educate and deliver motivated sellers fully pre-screened and pre-negotiated so you close more deals using less time, money and effort.
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