Right-priced for Resale.

Note: This post was originally featured on the     

I recently read an article on Inman News about pricing your house to sell quickly. Although the article focused on retail real estate sales and purchases I thought the subject matter applies to back-end sales for property flippers.  In an investment property situation factors that go into pricing a home are slightly different than those of owner occupants. But at the end of the day, relative sales comps drive the ceiling price for the area.  

It's been said you make your money on an investment when your purchase it. I believe this is a true statement.  Sure, an investment property may be listed at a great price, but investors need to look at the bigger picture.  The price on the acquisition only makes sense if the worse case scenario ARV still nets you the profit you are looking for.  The main "bogey" in the equation is TIME. It goes without saying, that the rehab can go way over budget and destroy your net profits. But,when running your numbers, don't forget about carrying cost.  Whether your a cash investor or using hard money financing, your money is tied up, either in interest payments or in the property itself.  

Which brings me to an important point: Be realistic about your days on market.  Everyone would love to flip their property in 90 days, but experience says it's probably going to be closer to 120 or longer.  If you are in a high interest hard money loan, an extra 60 days carrying cost can really eat into your bottom line. Why not build in extra days up front, and revel in happiness when it sells sooner?  This is why its so important to right-price your property.

"If the comparable sale information suggests that the value of homes like yours is declining, select a list price that undercuts the competition to drive buyers -- and hopefully offers -- to your home. You can take a more aggressive stance on pricing if the comparables show that prices are moving up."  - Iman News 

In the quote above, I have highlighted the one of the most important things about right-pricing to ensure a quick sale: "select a list price that undercuts the competition to drive buyers..."  It's not enough to have the best property in the neighborhood, you need to have the best property at the best price. My suggestion is check out the active listings near your investment, look at the amenities and the level of finish- exceed them in your renovation, but do it in a cost-effective manner that allows you to price your property below theirs (think acquisition price).  Look at the big picture, plant to undercut the competition and put out a better product. This will ensure a quick sale, net you more profit, and keep your money liquid for the next project.

Seth Teel is a licensed agent for New Western Acquisitions. I specialize in investment property, REOs, foreclosures, sales, acquisitions, rentals, auctions, estate sales, and all types of real estate investment. Call: 210-628-9373 or Email: [email protected]