Make Your Money When You Buy
There are a lot of unknowns when buying an investment property, but if you buy it at the right price you have wiggle room and a safety net to come out ahead in the deal even if your renovation doesn’t go as planned.
It sounds like simple advice: buy your property for a good price. However, it can be hard to follow for several reasons. The first challenge is finding the property. I don’t care where it is, there’s a right price for every property. In the same month I’ve sold a $4.4 million house on Mercer Island and a $130K mobile home—and both were good deals.
Rely On Curb Appeal
I don’t recommend using search engines like Zillow or Redfin to search for your purchases, at least not as your sole tool. They’re free services and in this case, you get what you pay for. All they do is look at data, but data alone doesn’t sell properties. Data doesn’t account for things like road noise, neighborhoods, views, curb appeal, etc. Because of this, the value these tools provide isn’t reliable.
Curb appeal—first impression—is everything. You have to see the house and walk through it to be aware of how emotion will play into buyers making a decision. How is the neighborhood? Does the property have any unique features? Does it have features that might scare off buyers? You can’t learn these things through Zillow or Redfin alone.
Tools Are Important
How do you determine the right purchase price? What factors do you consider when analyzing deals? How are you going to make the numbers work? Way too many people plan off gross profit alone and fail to account for unfactored costs.
I recommend building or buying a flip calculator to analyze your costs. At Caliber Real Estate, we’ve built a free calculator using knowledge we’ve acquired from years of experience. Often times buyers miss important costs associated with flipping a home. Taking into account selling costs, excise tax, property tax, insurance, etc. is crucial and resources like a flip calculator are invaluable. Don’t be afraid to pay for good tools and information. If you don’t have a flip calculation formula, you’re just making offers blind.
Use Emotions, Don’t Let Them Use You
While it’s a good idea to use emotional appeal to sell your property, it’s a bad idea to let emotion affect you when you’re buying one. Over and over, I’ve seen people get too attached to a property. They’ve been wanting to get into real estate investment for years and they pay too much for their first purchase. They make an emotional decision, not a logical one. And when the numbers don’t work, they try to make it up by skimping on the renovation, just laying down new carpet and a quick coating of paint. This often ends up with longer market times and skinny margins.
Make your purchasing decision based on numbers and not emotion, and know your exit strategy. Use great tools and great team members to get you to your numbers. When you’ve got those bases covered, you can move forward to buy your property at the right price with confidence.
If you’re looking for resources to get started, check out Caliber’s Buy a Home page. Along with our flip calculator, we have plenty of other tools and would be happy to help you make the right purchase.