How To Buy Houses At The Right Price For Real Estate Investing
Buy low, sell high is one of the most common expressions in real estate investing. Whereas this may sound too simple and common sense, determining the right price for your real estate investment can be tricky.
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?
Until recently, you could buy houses at 80 cents on the dollar and make a profit because the market supported it. After all house prices always went up even within a few months.
Currently, when you buy a house, you should expect the price to go down. Most people have lost equity in the last one year or more.
You have to consider this loss when you buy a house. 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.
Rental prices are also competitive due to this fact.
When you are buying houses, it is necessary to make sure you let the seller know these facts.
so when talking to a seller, I let them understand that I have to spend money fixing it up, holding it probably for months, then sell it at a deep discount.
And chances are that I might be unable to sell it at all in the current market.
I explain that I might lose most of my profits when I hold it. Almost all seller relax when they understand these facts.
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.
Once they understand the current market conditions, then I can make my offer - and it offer does not look too low-ball and the seller is likely to accept it.
Why should you have 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.
If you buy properties on terms such as lease options, it is also necessary to do this. 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, in a year or two when you try to sell it, the price at that price will support the sale.
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Excellent Post!!!