When to Buy a Property for More Than It's Worth

Before you think I’m absolutely crazy to buy a property for more than what it’s worth, please hear me out.

Guys, of course we know we should be buying properties under value or as cheap as possible. Then, we should put whatever we need into the property to get it to a sustainable long-term standard without things falling apart. And then there is equity in the deal that we can refinance and put into another one.

I’ve been around long enough to know all of the strategies.

But what I want to do with this article is aim it toward those who might not have the expertise, time, or will to go out and do all these things. Buying a dirt cheap property, fixing it up, refinancing it, and then rinsing and repeating is not easy.

Turnkey Real Estate: When the Cost Is Justified

So, this is for all of you folks out there looking at investing in turnkey real estate. Yes, I know there are shady operators out there, but there are a few companies doing the right thing. They are looking after their investors and have some of the best reputations in the business.

You know why? They probably sell their properties for a little bit more than they are worth. In this particular case, this is not always a bad thing, because that entire service and package comes with a completely hands-off experience—or at least it should.

So, if you do not want to do any of the work such as finding, buying, renovating, tenanting, managing, and dealing with ongoing maintenance, then you may have to look at purchasing through a turnkey company. In many instances, I think you are going to be hard pressed to find a legitimate turnkey company that will sell your property for way under market value and offer all those services.

Related: 3 Types of Investors Who Might Benefit From Owning Turnkey Rentals

You Get What You Pay For

Don’t forget that price is what you pay and value is what you get. Sometimes, there is no harm in paying a little extra to get more value, a better product and better service. I didn’t believe in this for a long time—I was always looking for the deal, and I always wanted to buy a property as cheap as possible.

This mentality, however, is not successful long-term, because oftentimes, seeking a deal at all costs may lead you to rip other people off or work with less-than-quality individuals. I think every business transaction should be a win-win for everyone involved, because if it’s not, someone will become disgruntled.

Generally, I believe you should only buy a property for more than what it’s worth if you get the complete package. And if it’s a 100 percent hands-off experience, if you don’t have to do anything except check your account for the rent, then it’s worth it.

Even if you buy a property today and pay a bit more than what market value is, then three to 10 years later as inflation grows, the real estate prices will likely go up in value. I think if you’re looking at buying and holding long-term, you should be OK.

If you’re looking at buying today and selling tomorrow, you will lose money—so don’t do it.

Contrary to popular (or property) belief, I think that there is a customer out there who may want to buy a property for more than it’s worth. This is because it might make sense for their particular situation. For everyone else—the 99 percent—we definitely want to buy properties as cheaply as possible.

What are your thoughts? Do you think I’m right? Do you think I’m wrong?

I’d love to hear from you in a comment below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.