BiggerPockets

Here's the question - why are some sellers/buyers disturbed by the fact that the other party in the deal is an investor and will end up making a profit?

Last year I had a potential buyer coming to see a property and I was honest and open about everything I am doing, also that this property is an investment for me and if I can not sell it, I will keep it as a rental or move in myself.

Until this point everything was going well and she was interested in purchasing it as her daughter was living in the house next door.

The talk about my potential options with the property made the client very curious and she started asking more and more, trying to figure out how much I will make on the deal with seemingly very little work.
(Yes, I ended up making an hefty profit but the buyer, who was the next person after her to come and see it, bought it at a very fair price and got a good deal, when it came to comparing prices of similar properties in the area.)

She did everything she could to try to talk me down to selling the property for less what I had paid for it. (60% ARV) and we parted ways.

I feel like she felt she was about to get ripped off, because I had paid so little for it. She liked everything else about the property and I think she was almost ready to buy.

I have tried different techniques and while telling a little white lie about why I am selling the property (had problem tenants and want to get rid of it asap, etc) has not caused any problems with buyers, I like to sleep sound at night and prefer to tell the truth.

How much should I tell to a potential buyer about why I am selling something? How much money I'll make? ... And how can I avoid a problem like this in the future when I'm flipping a property?

(This turned out to be quite long :) Any ideas?

i hear your pain...i have 2 stories to tell you:

1. a wholesaler bought a vacant, boarded up 4plex for 32k. he wanted to sell it for 55k. i was currently looking at another vacant 4plex for 85k. i didn't want him making 20k off of me for not much work on a cheap property, but in the end, the wholesale 4plex was a better deal even, if he made a few bucks off of me. i was wise enough to be able to understand the numbers, and take my emotions (jealousy) out of it. in the end, i rehabbed that 4plex, sold it after a few months, and made more on it than most people make in year's salary.

2. i was selling a multiunit property. i bought it very low and fixed it up and stabilized it with good tenants. i had a buyer tell me verbatim, "this is the best deal in charlotte, and has the best cashflow, but i won't buy it if you're gonna make that much money"...obviously he wasn't a sophisticated enough investor to look at numbers---his emotions got in the way, and so he lost out on a great deal that others jumped at...

my advice is to play up the good parts of your deal. i challenged him to find a better deal, and he said he knew he couldn't...i don't tell people what i paid, but it's public info and any half decent investor who has taken a course or read a book will know how to find it..of course that doesn't include your rehab, so you can always tell them that you had to fix it up (only if you really had to fix it up though--don't lie)....another thing, i have lots of multifamily that i'm constantly buying and selling--i always give the same reason for wanting to sell (which is the truth btw)..i am selling some smaller properties of mine to consolidate and buy a larger mutlfamily of at least 50 units..this has seemed to go over well with buyers for me at least

Some people will not accept the fact that the early bird gets the worm and they will cut off their nose to spite their face.

As Jason said, too much info. If you feel you need to explain that you have not owned the property for 20 years (they will likely find out) just tell them that you are an investor, that should say plenty. The fact that you need to buy another proeprty is good enough reason to sell anything. Good luck

I had one available for sale last year. A (very motivated) buyer came along and insisted on getting central AC installed by me (houses in that neighborhood rarely have central AC) - but was very fixated on the price they offered to me. They saw what we paid in the public records, and refused to give us the number we needed to get to add the central AC. I believe it was some emotional or psychological barrier - because our asking price was more than fair (actually, it was less than what a fair price for that house would have been :D ). So they ended up paying about $50k more, for a house one block away that did not have central AC, and that wasn't a fresh rehab (and the property they bought didn't even have forced air heat - it has radiators - a lot more pricey to add central AC to that)! Of course, I knew that they were motivated buyers, but was still willing to give them a fair price in spite of that their motivation to buy; that motivation to buy, along with their emotional / psychological hang-ups about "over paying" an investor caused them to overpay somebody else!

I've never had an issue, but I've always gotten lucky. I actually had a seller go through his rent roll with me and tell me, "You can raise the rent on this guy, this guy, and this guy, they aren't going anywhere no matter what you do. You'll make a lot of money on this one right here."

It was one of the most interesting deals I've ever done. In most other cases, I just try to explain that both people are coming out ahead. The difference is that the seller wants cash in hand and the buyer wants a deferred payment. I'm making more money in the end because I can afford to not have it now.

On the other hand, the investor who got in over his head on 6 other mortgages needs cash now, and I've got it. That's the good deal for him. I try to explain everything as a win-win, and that both of us are doing well in the end.

Thank you for your thoughts everyone, all responses have been helpful.