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A good deal has nothing to do with a list price

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guest | 18 May 2011, 12:45 AM Agree 0

 
He explained that this property was listed for $800,000 last year and now it’s listed at $700,000. That made it a great deal in his view.I got a few dirty looks from other attendees when I laughed out loud at that comment. He just made a huge mistake – one that many new real estate investors make too. That mistake is confusing list price with property value. In many cases, list price is just the wish price of the seller or some lofty value a realtor gave the property in order to convince the sellers to list with them in the first place.Just because you’ve purchased a home for below list price doesn’t mean you got a good deal. And just because a place that didn’t sell at $800,000 is now listed at $700,000 doesn’t mean it’s a good deal either.You’ll get a better indicator of value by answering the following questions:1. What is the cash flow from the property?2. What are other properties in the area worth? (Look at properties that are comparable in overall size, age, condition, number of bedrooms and bathrooms, as well as lot size.)3. And, finally, what would it cost to build that property right now?In residential real estate, the best indicator of value is typically based on comparable properties in the area ? what they SOLD for, not what they are listed at. But you should also consider cash flow and replacement cost.Don’t even look at the list price. It’s not a true reflection of what a property is worth. Determine what the value of the property is to you, and then, if you get an accepted offer, you can be confident you’re buying it for a good deal no matter what it’s listed for.Want more real estate investing tips? Sign up for Julie’s free real estate investing newsletter . Julie Broad is a full time residential real estate investor, real estate investing coach, award winning blogger, and a regular contributor to Canadian Real Estate Magazine.
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  • samantha | 18 Jul 2011, 04:05 PM Agree 0
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  • samantha | 18 Jul 2011, 05:05 PM Agree 0
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