The next thing is looking at what is listed on the market in the area today. What’s your competition? And how do those prices compare to what is sold? In other words, if you look at everything that has sold, it was $200,000, but everything that is listed on the market right now is at $180,000. It tells you that the prices are dropping. Nobody is going to list their house at $180,000 if realistically you could still get $200,000. It must mean that they are dropping their price because they are getting beat up by the marketplace. Which leads to the next question, what are the days on market? How long have those houses been sitting there? If they are well under what houses have sold for in the past I’ll bet when you look at the days on market and how long they’ve been listed they are starting to exceed 60, 90, 120 days. The next thing to look at is how many rehab dollars is it going to take to make the house the nicest house in your price range. I am not saying to go crazy in your rehab and build a palace when everything is on a lower income level. That’s not the point at all. The point is to make it the nicest house in that area. Sometimes making it the nicest house simply means that it has brand new carpet, paint, fresh landscaping, just looks all clean and fresh. Then I want to be able to price it right.

The next thing is to be able to determine how long it is going to take to get this house on the market given the rehab needed. Is it going to take me a month to get it back on the market? Is it going to take me six months or more? The further out obviously the more risk there is. That is why right now most renovators are looking for properties with minimal amounts of rehab so they can get in, get out and not risk being in the marketplace too long. What you want to do is project out when this house be on the market and figure out what the prices will be at that point. If they have been declining at a rate of 2% per month and you are not able to put this property back on the market for three more months, then estimate a 6% decline on the market. Given that this is going to be the estimated value of the property at that point. You will build into your deal the right sale’s price and the right rehab dollars so you are buying smart. If you buy with your profit built in on the front end you will make money on the back end of the deal.

What you want is to price your houses in the middle of the pack. Don’t be the highest priced house. Right now is a buyer’s market. If you were in a seller’s market then you absolutely price it above the marketplace. Give them a great product and then charge them. If you do your research then it will feel like you have this crystal ball that you know what your house is going to sell for and you can buy feeling comfortable that you are going to be able to sell this property. The bottom line is that you have to build your profit in on the front end of the deal.

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