The Only Time You Should Ever Buy a Property for More Than It’s Worth

by | BiggerPockets.com

Before you think I’m absolutely crazy to buy a property for more than what it’s worth, please hear me out. Guys, of course we know we should buying properties under value or as cheap as possible. Then we should put whatever we need into the property to get it to a sustainable longterm standard without things falling apart. And then there is equity in the deal that we can refinance and put into another one. I’ve been around long enough to know all of the strategies.
But what I want to do with this article is aim it towards those who might not have the expertise, time, or will to go out and do all these things. Buying a dirt cheap property, fixing it up, refinancing it, and then rinsing and repeating is not easy.

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Turnkey Real Estate: When the Cost is Justified

So, this is for all of you folks out there looking at investing in turnkey real estate. Yes, I know there are shady operators out there, but there are a few companies doing the right thing. They are looking after their investors and have some of the best reputations in the business.

You know why? They probably sell their properties for a little bit more than they are worth. In this particular case, this is not a always bad thing because that entire service and package comes with a completely hands-off experience—or at least it should. So if you do not want to do any of the work such as finding, buying, renovating, tenanting, managing, and dealing with ongoing maintenance, then you may have to look at purchasing through a turnkey company. In many instances, I think you are going to be hard pressed to find a legitimate turnkey company that will sell your property for way under market value and offer all those services.

Related: 3 Types of Investors Who Might Benefit From Owning Turnkey Rentals

You Get What You Pay for

Don’t forget that price is what you pay and value is what you get. Sometimes there is no harm in paying a little extra to get more value, a better product and better service. I didn’t believe in this for a long time—I was always looking for the deal, and I always wanted to buy a property as cheap as possible. This mentality, however, is not successful long-term because oftentimes seeking at deal at all costs may lead you to rip other people off or work with less-than-quality individuals. I think every business transaction should be a win-win for everyone involved because if it’s not, someone will become disgruntled.

Generally, I believe you should only buy a property for more than what it’s worth if you get the complete package and if it’s a 100 percent hands-off experience. If you don’t have to do anything except check your account for the rent, then it’s worth it. Even if you buy a property today and pay a bit more than what market value is, then 3-10 years later as inflation grows, the real estate prices tend will likely go up in value. I think if you’re looking at buying and holding long-term, you should be OK. If you’re looking at buying today and selling tomorrow, you will lose money, so don’t do it.

Contrary to the property belief, I think that there is a customer out there who may want to buy a property for more than it’s worth  because it might make sense for their particular situation. For everyone else, the 99 percent, we definitely want to buy properties as cheaply as possible.

But hey, what are your thoughts? Do you think I’m right? Do you think I’m wrong?

I’d love to hear from you.

About Author

Engelo Rumora

Engelo Rumora, the Real Estate Dingo and your favorite Australian, quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He is currently in the process of launching an ICO that will "Decentralize The Real Estate Industry." He's also known for giving houses away to people in need and his crazy videos on YouTube. His life’s mission is to be remembered as someone who gave it his all and gave it all away.

4 Comments

  1. Jake Walroth

    In July I paid 189k for a house that appraised for 165k. Was I happy, no…. but my PITI is $1060/mo and I have it rented for 3k/mo…. so yea I’m not that worried I may have Paid more than it’s worth, because it’s still a cash cow

    • Engelo Rumora

      Thanks for your comment Jake,

      Appraisals these days are a “hit and a miss”.

      You didn’t necessarily pay more than market value just because that’s what the appraisal came in at.

      Ask a few local investors for “boots on the ground” feedback.

      I’ve found that local investors and trusted real estate agents will know market value better than appraisers.

      Well done on the awesome cashflow.

      Much success

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