Today’s REI Classroom Lesson
Alex Pardo lets us in on how he priced a home more aggressively and it sold the same day, making more money.
REI Classroom Summary
Research to find out how hot the neighborhood and type of home you’re selling and price it accordingly. By increasing the sales price of the home in the right neighborhood, you might be able to come out of the deal with more money and without losing much time.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Announcer: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Alex Hey, this is Alex Pardo. I’m going to be your host with the REI Classroom. Today specifically, I want to talk to you about a recent case study deal that we closed about a month ago. I’m calling it, “How I made an additional $25,000 by pricing the property too high.” I think this is a lesson you’re going get a lot about it, little nuggets from, and something that hopefully you can implement in your business moving forward.
Announcer: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Alex: Awesome. We recently closed a deal where my team and I, we contracted a property and it was in a really good part of town in Miami. Just to give you some numbers, the after repair value of this property was around $300,000. It was a duplex. We contracted the property for $200,000. We decided that we were going to price this property at $222,000 just to leave some meat on the bone for the buyer.
Before marketing the property, I got together with my team and I said, “You know what? This is in a really good part of Miami. Why don’t we swing for the fences here?” Number one, it’s a duplex. Typically on multifamily properties you’re going to have buyers that are willing to pay more because it’s a cash flow deal. Even though there was about $80,000 or so in equity, because of the fact that the buyer was probably going to be renting this property out for cash flow and it was in a good part of Miami, I said, “You know what? Let’s swing for the fences here.”
Literally, within probably 15 or 20 minutes before we sent out the marketing, I called my team. I spoke to our virtual assistant. I said, “You know what? Let’s increase the price from $222,000 to $249,000.” Literally, we were increasing the property $27,000. We sent out the marketing and I said, “You know what? Even if it takes us an extra couple of days and we don’t get it sold today, even if I sold it two or three days, it’s worth it if we’re able to get even half of that.”
To my surprise, we got the property sold that same day for $247,000. We literally made an additional $25,000 spread, just by at the last minute deciding that we were going to price it higher, number one, because we knew it was a hot area of Miami. It’s an area where a lot of buyers want to be, and number two, recognizing that since we were dealing with a multifamily property, not a single family, just realize that cash flow investors or landlords are willing to pay more for a property than a fix-and-flip buyer because they don’t need as much spread.
A fix-and-flip buyer is going to go in there and it’s pure numbers. There’s a certain margin they need to work and operate within, versus a landlord or a cash flow investor that’s going to go in there and as long as it meets a certain return, whether it’s 8%, 10%, 12% return on your money, they’re willing to do the deal and just recognize that you can make more money when you work with landlords and buy-and-hold investors versus a fix-and flip-investor.
Again, it’s a way to make more money on these deals. I challenge you, if you get a property in a really good area, and that really goes to understanding what your buyers are looking for, so focus on areas where you know are hot where properties are moving. Specifically, if you couple that with multifamily properties, this is a perfect case study. Hopefully, it opens your eyes to think about how you can expect to make more on a per deal basis, and then feel free to get aggressive with your pricing because in this particular case it made a difference between us making $22,000 versus close to $50,000 on a wholesale deal.
Again, this is Alex Pardo, and hopefully, you’ve enjoyed this lesson.
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