Estimating Purchase Price in a Soft Market

Buy & Hold vs. Fix & Flip, it really doesn’t matter when it comes to what to pay for an investment property. To address the idea of how to make money in this current real estate market, you need to know how to evaluate a properties “Profit Potential”. Your profits are in the purchase price!! You must know how to estimate the necessary repairs and how quickly they can be completed, and be clear what the property is worth when you’re ready for resale.   I have seen many investors try to cover up mistakes in underestimated repair costs, or over-paying for a property, by hoping the market value will catch-up to the extra costs, or trying to find a nieve buyer to make up for their monetary mistakes.

It’s a different market today! As an investor, you need to know what the property will be worth after repairs are completed. You have to be carefull to evaluate the cost of necessary repairs, estimate your cost of financing, and adjust your future sale price to be competitive in this market.  

Buyers won’t overpay for any property! They have too many options.

Location is another huge factor to consider! Properties in great shape, in areas with good re-sale history are still selling at record pace for top dollar.  

Be sure to use your team when you consider a property. Your realtor can give you an opinion of current market value and after repaired value, your contractor can estimate your repair costs & how long it will take, and You establish your profit margins. These are all numbers you need to know when you arrive at your purchase price!

This market is rich in opportunities, you just need to be diligent in your evaluation of all the potential properties availible.

 To discuss more about this topic, contact me for a FREE cup of coffee.

Mike Jechorek, ReMax Real Estate Properties, 763-252-3410.

5 Things to do before putting your home on the market

5 Things to do Before Putting Your Home on the Market 1. Have a pre-sale home inspection. Be proactive by arranging for a pre-sale home inspection. An inspector will be able to give you a good indication of the trouble areas that will stand out to potential buyers, and you’ll be able to make repairs before open houses begin.  2. Organize and clean. Pare down clutter and pack up your least-used items, such as large blenders and other kitchen tools, out-of-season clothes, toys, and exercise equipment. Store items off-site or in boxes neatly arranged in the garage or basement. Clean the windows, carpets, walls, lighting fixtures, and baseboards to make the house shine.  3. Get replacement estimates. Do you have big-ticket items that are worn our or will need to be replaced soon, such your roof or carpeting? Get estimates on how much it would cost to replace them, even if you don’t plan to do it yourself. The figures will help buyers determine if they can afford the home, and will be handy when negotiations begin.   4. Find your warranties. Gather up the warranties, guarantees, and user manuals for the furnace, washer and dryer, dishwasher, and any other items that will remain with the house.  

5. Spruce up the curb appeal. Pretend you’re a buyer and stand outside of your home. As you approach the front door, what is your impression of the property? Do the lawn and bushes look neatly manicured? Is the address clearly visible? Are pretty flowers or plants framing the entrance? Is the walkway free from cracks and impediments?

Realtor Magazine Article