Real estate investors looking to flip or wholesale properties need “additional” local comps to guide them toward a decision as to whether to purchase each property they consider. Real estate agents are typically only concerned with pricing properties which are “ready to go”, or close to it. However, a flipper or wholesaler is not going to purchase a property for anywhere near the current market value.
Here is an example. Suppose there is a single-family home on a block with neighboring homes selling in the $200,000 range. This property, however, needs a lot of renovation and/or repair, which the current owner is not willing or able to finance. As a real estate investor, you need much more than the comps showing the value of good condition neighboring homes.
While considering, or upon making a conditional offer, you need to be able to inspect the subject property. This is whether you do so yourself and/or hire a home inspector. Your goal is to determine the cost of bringing the property up to market value. There are costs to consider, ranging from fixtures (roof, furnace, electrical work) to labor (deep cleaning, painting, etc.) to renovation. You also need to consider the profit margin you expect to justify your purchase and the time and expense to bring to market value.
Before doing repairs and/or upgrades to the property for resale, you need to consider roughly $15,000 for commissions and closing costs. You also plan to come out with between $20,000 and $25,000 profit when all is said and done. If you acquire the property for $140,000, it leaves you with a maximum of $20,000 to $25,000 to spend on the rehab.
The $140,000 amount is based on being roughly 70% of market value. However, an investor needs to know if offering $140,000 or less is viable. Most real estate agents base the buyer comps on the $200,000 market value even though an investor will not offer anywhere close.
This is one of the reasons why PropertyChoiceDirect.com offers analytic software which provides local comps based on investor criteria. You can search most neighborhoods and see recently sold nearby properties which were purchased by investors. In addition, you can then compare against “market value” comps to get a much clearer picture on your potential investment.
You can do all of this whether working with a real estate agent or not, and there are no restrictions whatsoever as to which agent you can work with. The software accesses current and updated data and is available month to month with no contract required. Newer investors can access the video training along with regularly scheduled live webinars as part of their membership.
Real estate agents and brokers can also utilize this software for helping their investor clients to acquire more properties. Details at PropertyChoiceDirect.com .
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