Posted over 12 years ago

Real Estate Investing: Make Your Profit When You Buy, Not When You Sell

     The title of this article is an old real estate adage that pertains to being smart about your investments.  It is about finding good enough deals that when it comes time to sell, you won’t have to work for it, the profits will simply fall into their rightful place—your lap.  The key to finding good deals is to look for properties that are listed well below their actual market value (this takes a pretty solid understanding of what goes into the consideration and appraisal of a property’s value).  In most cases, there is no such thing as a good deal without a motivated seller.  That is to say, where there is a pressing need to move, there is a pressing need to sell, and then there is a golden opportunity to buy.

      The most common factors that generate highly motivated sellers are divorce, death in the family, job transfer, and financial distress (the big one!).  These are people for whom relocating is a higher priority than profiting.  They won’t all list their homes below market value, but you would be amazed what some people are willing to accept after only a few minutes of negotiating.  By accepting either very low cash offers, or offers which include unconventional financing terms, the desperate sellers provide the investor with an incredible opportunity to sell at a much higher price down the road.  The difference between the investor and the original owner is not the quality of the property, but the luxury of time.  Once you’ve closed a great deal, you can take as much time as you want or can afford to find the right buyer to make the transaction worth your time, money, and energy.

      If your concern is preying on someone in financial distress, be rest assured.  The seller will not sell to you if you offer a price that is lower than what they are willing to take.  In other words, you’ve come to a mutual agreement on a price that works for both the buyer and the seller.  Although the seller loses some money on the transaction, it’s probably negligible compared to the amount they would lose by remaining in the house.  You get a good deal, and they get rid of what must have been an enormous burden for them (otherwise they wouldn’t be motivated sellers).  In most cases, they will be grateful that you’ve saved them from foreclosure, or allowed them to move in time without paying for a vacant home, or helped them in some other way.  Don’t think of it as ripping them off, think of it as getting a tip for the service you’ve provided the seller.  If you do it right, your profit will all be made before you even own the home.  When you own something which is of substantially greater value than what you paid for it, then you are playing with house money.  Enjoy! 

Tell us what you think. J 


Comments