Best Price Range For Real Estate Investment Properties
A lot of real estate investors are unsure what price range they should target. Higher profits are generally associated with more expensive profits.
We examine both scenarios and the best properties to target.
The price range of houses is determined by the geographical region. For example houses are more expensive in California than say, Texas. So depending on your local market, you have to decide what is cheap and what is expensive.
In most places, a medium class 3 bedroom house, would be a safe medium range investment.
So how do you determine the best price range to invest in?
1) Business model
When I wholesale my houses, I target properties that are less than $150,000 in Texas. These are houses most real estate investors are looking for. There are more potential buyers for these properties, so they are easier to sell.
Medium income neighborhoods are more common in the markets I target and therefore seem to have more properties for my business model.
If you are buying properties subject to the existing mortgage such as lease to own, you may be able to target a higher price range for your real estate investing deals. You cannot do wholesale deals in the same price range successfully.
Similarly when you target luxury homes the price range of the houses you buy goes up.
2) Neighborhoods
Lower end neighbourhoods will have cheaper houses. These come with their own set of problems such as vandalism, defaulted rent payments, trashy tenants, etc. The list goes on and on.
The best properties to target are the most common ones in your market.
3) Target profit
Most people think that there are higher profits in higher end properties. Maybe this is true. But it could also mean more capital investment such as advertising to target higher end buyers.
Luxury homes can cost a lot to repair (even touch-ups). So if the deals don't work, you can make bigger losses.
In general, you will handle less higher end properties but they will give you more profit per deal. You can handle more lower end properties and probably make more money.
4) Availability of buyers
There are fewer buyers for higher end properties. Likewise when you target the lowest end, you will get less buyers because most people tend to turn away from them.
So which is the best business model for real estate investing? It depends on your choice one you consider all these factors.
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