Different Market Dynamics

1 Reply

I am hoping to get a discussion started on the market dynamics for different areas around the country. I'm interested in getting other investors' thoughts on their specific market and how it differs from other areas. 

Reading through posts on BP, I hear anecdotes about people who are getting properties at great discounts while only requiring $10-$15k in repairs (basic kitchen/bath updates, new paint, etc.). The rational behind this transaction is that the seller wouldn't be able to sell their property (or would risk long days on market, selling at dramatic discount) without these updates being made. However in my market, this dynamic does not seem to be the case. What I mean is that very outdated homes have no problem selling if they are priced right. For example, if I update a 1,200 sq ft ranch home in a certain town I'm active in, it will sell for $175k. If I have a licensed contractor do a total cosmetic update, it would probably costs around $25k (new kitchen, baths, trim, paint, doors, floors, etc.). However, if that home were listed on the MLS, it could probably fetch around $135-$140k.

So the fact that my rehab of $25k is only adding $10-$15k in value to the house over what the rehab costs makes it difficult to negotiate these types of deals I described in the anecdote above. I guess I'm just curious to hear if other markets are similar to mine or if there are certain areas of the country (or possibly different price points of houses) where rehabbing a house adds significantly more value (for example, a $20k cosmetic rehab adds $50k in value to the property).

Hopefully we'll get some interesting feedback from this.

Kyle

Not sure I understand your numbers, but I get the point.

We are at a point in the market cycle where a lot of people are sitting on the sidelines. Sitting on the edge of the stream. If you look out into the water, you see a lot of people trying desperately to make it to the other side. A lot of inexperienced types jump in and don't respect the current (market) and get swept down river. There is no sense in being a motivated buyer in a seller's market. Wait for the river to calm down and your journey will be less stressful and more productive. The numbers generally don't lie. It's hard to be patient. In the lull, some people may invest their energy in other endeavors... like building a bridge...

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