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.