How To Negotiate For A Low Price When Buying Houses For Real Estate Investing
- Author Simon Macharia
- Published February 18, 2012
- Word count 451
Buy low, sell high is one of the most common expressions in real estate investing. As simple as it may sound, it is not always easy to buy houses at the right price.
You must buy houses at a price that will make you good profits whether you sell them immediately or whether you keep them long term as cash flow properties.
So how do you get the best buying price when buying your properties?
Until recently, the market supported buying houses as high as 80 cents on the dollar. After all house prices always went up even within a few months.
In today's market, you must expect the price to go down after you buy a property. Almost everyone who owns a house for a year or more has lost equity in it within that time.
This means that when you buy a house, you must consider this fact. Today, wholesale properties 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.
When you are buying houses, it is necessary to make sure you let the seller know these facts.
So I always let a seller know that even though it seems like they are giving me a deep discount on their property, I have to fix it, then sell it, probably hold it for months and eventually sell it at a deep discount.
And I might be unable to sell it at all in this 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. Motivated sellers do not like to feel taken advantage of even though they really need to sell.
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 do you need to explain all this?
Currently, you must buy houses cheaper than we used to a few years ago since you have to sell them lower.
This applies also to properties that you buy on terms such as lease options. Even though you can buy higher when you buy on terms, the price must 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.
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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