Purchase price near Market Value - is this a good strategy?

Question

Can a case be made for buying a rental property (in good condition, i.e minimal repairs needed, at near market value prices with a qualified renter on a current lease, or is this generally something LTH investors will stay away from?

Thank you for your input.

Darius Ogloza · Answer

Remember the adage: the perfect is the enemy of the good.  You could spend a lifetime waiting for the perfect opportunity and pass by a lot of deals that, over time, could have got you to your destination.  Maybe the perfect deal never comes.  If it is truly a long term hold, then I see nothing wrong with taking a "merely good" deal.

Jenning Y. · Answer

Absolutely Yes.

Dr.  David Schumacher's book "Buy and Hold Forever: How to Build Wealth for the 21st Century" is my second most favorite book ( My  No 1 favorite is  : The Millionaire Real Estate Investor  by Gary Keller).   Dr Schumacher's investing strategy  is very simple : try to buy in  promising area and hold them long. In his words " the buying price is really irrelevant"  if holding long enough in an emerging area.  He amassed about $20 millions wealth with this simple strategy before he passed away.

So the answer is absolutely yes,  at least it is a far better strategy than buying from some so called turnkey providers in so-so markets, IMHO.

Jonathan Oh · Answer

@Chris Cooper If it cash flows, you like the location, and it fits into your long-term strategy, nothing wrong with that.

AJ Singh · Answer

@Chris Cooper

a rental with an inherited tenant should be a discount to market value. The seller cannot sell at ARV/Market Value  due to deferred maintenance and lease enforcement

I have bought several in the same scenario. First of all the inspection never reveals hidden flaws in an occupied house. And if tenant does not like your style of management. they will give notice to leave

Do you due diligence

Jennie Kesselman · Answer

I second @mack benson - if the numbers work and you are willing to hold long term it is absolutely worth trying to get behind.  I can't speak for your local market but if it is anything like where Im at in the Northeast, procuring a property well below value may be challenging and there's something to be said for lost time cost.

Mack Benson · Answer

I think a case can absolutely be made for purchasing a property at or near market value. It all depends on your business plan for the property and if the numbers make sense. I think people get too hung up on home run deals, the perfect BRRRR, or only paying xx% of the ARV for a property. If the numbers make sense then the numbers make sense.

Know your goals and stick to your criteria. Write it down, hell use a 1" black Sharpie and plaster it all over your office. If your criteria is solid and a property fits it, then why hesitate.

Jon Q. · Answer

If it’s a SFR, I would not invest in property that already has a tenant.  Don’t inherent other investors’ problems.  They’re selling for a reason... and they won’t tell you the reason.

Also, never pay market value... period.

If you break these two rules, you’re increasing your risk.

Chris Cooper · Answer

I need to add those books to my Christmas list. .thanks for the recommendation @Jenning Yu

Will Gaston · Answer

@Chris Cooper there are tons of strategies that I don't use that work great for others. However, paying market value also will likely slow you down if you don't want to bring a partner in.

Putting 20% down on every property, plus having 6 months of reserves, money for CapEx/repairs, etc usually means cash dries up quick for most investors.

Chris Cooper · Answer

@Will Gaston that is the same thing I have heard, "you make your money on the buy, not the sell". So I am having a hard time getting past that in my mind since I've focused more on flips where the buy price is everything.

@Mack Benson  This is first time getting into LTH so trying to learn as much as possible to make a good decision on what are the best metrics and goals to focus on.

Purchase price near Market Value - is this a good strategy?

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