Selling in A Down Market
By Robin Thompson "Queen of Rehabs"
Many real estate investors shy away from the
ugly house business because they fear selling
houses in a depressed real estate market. We
have all heard the horror stories of real estate
investors who lose their shirt because they get
stuck with a property they just
can’t sell or rent.
I am here to tell you that this
does not have to happen to you,
but there are nine rules you can
never violate. Selling a house
starts before you ever buy it. I
start focusing on marketing strategies
as I pull up in the driveway
for the very first time, not after
I purchased and renovated the
house. Most untrained investors
never focus on selling until after they have the
property renovated and by then it is too late
for most. Let me explain why in more detail.
Step #1 for selling a house starts with buying
the right house that the majority of first time
buyers would want to call home. The easiest
mortgage money for a first time buyer to
qualify for right now is for a FHA, VA or Conventional
Financing. The good news is the
down payments are low and the seller can
pay most of the prepaid expenses and closing
costs. The bad news is the buyers need good
credit. Buyers with good credit scores are
much more critical about the house they pick
to call home. Real estate investors must be
very selective with the homes they are buying,
renovating and selling to ensure they can
sell for a large profit.
So here is the list of my eight houses to never
1. Never buy a house on a busy street. Inexperienced investors who can buy houses dirt cheap on a busy
street think they are great buys but they
are not. They are tough to rent and hard
2. Never buy a tiny house
that is less than 1000 square
feet. With a huge surplus
of houses for sell right now,
buyers have a ton of homes
to pick from and the buy the
bigger homes. Over 85% of
the buying population wants
at least three bedrooms.
3. Never buy a house
with a small master bedroom.
I will never buy a home where the
master bedroom is smaller than 12 x 12.
Most first time buyers already own the
bedroom furniture. The furniture stores
push the king size bed, huge dresser,
amour, and two night stands for a low
package price and that is what first time
buyers purchase. If all these items won’t
fit in the master bedroom of the house I
am looking to buy, then I won’t buy the
house at any price.
Many inexperienced investors struggle
with this. I have made this mistake early
in my real estate career and I got the privilege
of making 14 monthly payments on
a house that I couldn’t rent or sell because
the master bedroom was too small.
4. Never buy a house in the war
zone. Nobody wants to rent or buy in a
high crime area. Contractors don’t
want to work there either.
If you are new to an area and you are not
sure about the crime rate contact your
local police department and ask for the
undercover detective that is assigned to that area and they will be
able to provide you with the crime statistics for the area.
5. Never buy a house that is mixed use or next to a commercial
area. Mixed use properties require substantial down payments
of 20%-30% for financing which eliminates the majority
of buyers. Remember you want your property to appeal to the
masses not the minority. Most first time buyers don’t want noisy
commercial businesses near their home. Stay away from properties
near low income housing, high tension power lines, train
tracks, and sewer treatment plants.
6. Be careful if you are considering buying a property with
no garage. I have purchased 276 houses during the past 12 years. I
actually went back and looked at how long it took me to sell houses
with garages vs. houses without garages. My average holding
period to buy, fix and sell a house with a garage is 121 day. My
average holding time for homes without garages is 239 days. Yes,
that is correct it takes almost 4 months longer on average to sell a
property without a garage.
7. Never buy a house where you can not correct functional
obsolescence. Examples would be a house with low ceilings, narrow
stair case, bad layout, because the flow of the rooms is weird
or tiny bathrooms or kitchens that can’t be expanded.
8. Never buy an entry level house in a flood zone because
the insurance cost will be high. Most first time buyers are extremely
sensitive to their monthly payments. The extra premium
for flood insurance can make the monthly payment much higher
than other houses in the same price range.
Ms. Thompson was at our local REI meeting last night, I thought she gave us some valuable information.
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