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.
This trend is likely to continue in the foreseeable future, meaning the prices of most houses will be less tomorrow that they are today.
So how can you make sure that the house you buy today will hold its value until you sell?
Most people looking to sell their homes are waking up to the fact that the value of their house is getting unstable.
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 realize that almost nobody buys houses at full market value today.
With so many houses sitting in the market today, you can almost certainly negotiate your price down even for properties that are already deeply discounted.
Motivated sellers therefore know that even though they think they are giving you a discount, you must also give a discount when you sell the property.
for instance, you could end up holding a property for six months if you buy, fix and sell.
How much value will your house lose during this time? You could end up paying too much for your investment houses if you do not answer this question before you buy.
If your business model is to wholesale houses, you still need to answer this 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.
Previously, most investors have been quite comfortable buying houses at 70 cents to the dollar minus repairs. Probably some people still do buy using the same numbers. In this market, 60% minus repairs is barely enough.
These numbers could work perfectly if you fix them to keep as rentals.
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. Of course you must also remember that you will need 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 do understand these things. Of course they think that they are giving you say $20,000 discount. Any good real estate investor knows that we 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.