MLS Pricing too high, no room for profit.

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MLS Pricing too high, no room for profit.

Michael Kotylo
Southeast Michigan · Member since 2023 · 23 posts · 13 votes

I made an offer this weekend on a property that was priced too high to make a profit. Listed for 320k, with rental comps around $2500/mo, which would cashflow negatively ~$500/mo, no thanks! ARV was 400k on this and it was a 1972 time capsule. I offered $280k and everyone acted like I was stealing out of the collection plate at church. I didn't care, I'm not trying to please the world, I'm making a financial decision that will either reward or hinder me.

My offer would have negatively cashflowed -$1/mo, however the appreciation and equity would have made up for no cashflow so I was comfortable at my offer price. I don't see how anyone was going to make money on this one, so it must have been owner occupants making emotional decisions. 

Is anyone experiencing something similar?

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
3y

Ive been hearing people with the same complaints for the entire 20 years Ive been in real estate.  Year after year, decade by decade goes by and they keep not buying because they keep saying the numbers dont make sense....sellers want too much money...I cant cash flow enough.

I keep buying year in and year out regardless of market conditions. You said the property would rent for $2500...Id pay $500k in my market for a property that rents for that in my market happily. 

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  • Ronald Ty
    Member since 2020 · 68 posts · 30 votes
    3y

    I like to follow up on buyers who pay a lot for a property. Most do most of the work themselves. One was a married couple. They put in 6-700 hours of labor! No thx!

    another investor put a renter in there with little to no rehab. House was in really bad shape. The concrete steps to the door were in disrepair and a trip hazard. Again, no thx!

    and then you can have homeowners who will delay some repairs until later and/or do the work themselves even if it's cash. Had a neighbor do this and it was a sheriff sale so sight unseen. Went it the home (5000 sq feet) and the amount of work was ridiculous. But they wanted their kids in the school district. They would have been better off just buying any other home in the neighborhood. Plus,the stress and aggeevation. Dod i also mention she was pregnant,

    0Reply
  • Christopher Sandys
    Member since 2023 · 97 posts · 60 votes
    3y

    @Michael Kotylo  Will you post the property?  I promise I wont buy it out from under you!  It will be interesting to see this one play out, and see how the seller does.  

    0Reply
  • Maz Pardhan
    Member since 2021 · 47 posts · 27 votes
    3y

    There are quite a few investors who cant fathom buying in a geographic location other than where they live. My portfolio is a 4.5 hour plane ride away, if you have a good team in place, you can work in markets that make more sense. Its good you're looking for cashflow, but you also shouldn't have a situation where your pitching in monthly when something unforeseen happens. Expand your horizons to better markets where rental rates allow you significant cash flow. happy to help if you need to know how i did this. 

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  • Ronald Ty
    Member since 2020 · 68 posts · 30 votes
    3y

    Even the sheriff sales are crazy high. Some of these guys do most/all the work themselves and still don't win the property. 1 home was worth 500k and sold for 430k. After paying all your closing and property taxes in arrears, you've got nothing to rehab.

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  • Ricardo Hidalgo
    Real Estate Agent · Member since 2019 · 569 posts · 257 votes
    3y
    Quote from @Michael Kotylo:

    I made an offer this weekend on a property that was priced too high to make a profit. Listed for 320k, with rental comps around $2500/mo, which would cashflow negatively ~$500/mo, no thanks! ARV was 400k on this and it was a 1972 time capsule. I offered $280k and everyone acted like I was stealing out of the collection plate at church. I didn't care, I'm not trying to please the world, I'm making a financial decision that will either reward or hinder me.

    My offer would have negatively cashflowed -$1/mo, however the appreciation and equity would have made up for no cashflow so I was comfortable at my offer price. I don't see how anyone was going to make money on this one, so it must have been owner occupants making emotional decisions. 

    Is anyone experiencing something similar?


    I recently bought a few deals under valued on the MLS. I am finding that that properties that need renovation they can be str or on the beach are generating profits on cashflow and immediate equity of 25-35% return on the invested cash.

    1Reply
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