The right approach, in this market place, is every two weeks to every month, reassess the value. You want an objective approach, you want to look at actives, you want to look at solds and you want to look at under contracts. By looking at that you can determine a good price reduction.
I want to talk to you about some things that I have noticed from Texas Hard Money Lenders and some of the things that are happening in the Texas marketplace. The Texas marketplace is booming with opportunity for the Real Estate Investor. However,
upon speaking with Hard Money Lenders; I thing that where Investors are having a problem, is learning to price their fix and flip and how important it is to do it correctly.
When you are pricing the property, many investors get a little too excited about the repairs they have done to the property. They spend time doing the repairs on the property, either by themselves or have been managing the repairs, seeing what is done, choosing colors and picking the tile, and they think that they have the nicest home on the block.
It may be, but we all see the world through rose colored lenses.
Visiting with Texas Hard Money Lenders, I think that they will tell you that it is true, many people fall in love with their property and it is important that you do not. So, as you are looking at a property you may have established what you think you are going to sell the property for when you started the project. But when it comes time to put it back on the market you have got to reassess the value of the property all over again.
It is important that you get an objective approach, have somebody else do this, do not do this yourself, get a couple of people to give you opinions of value because value is going to change. It may get better. It may get a whole lot worse. It may get better because you did more to the property, repairs you did with getting Rehab Loans increased the value or markets are on the rise. It really depends not just on the City or State but it also depends on the “micro area” or the area within the area.
It could be one that does well and another that does poorly depending upon the condition of the market place. But, I think in visiting with Texas Hard Money Lenders some other things are going to be important for you and that is to realize and make your price reductions.
Now lots of people may agree to do your price reductions on the value and they say every month we are going to reduce price by $5,000; or we will adjust the price by 2% or 3% but that is the wrong approach in this market place.
I visited with the borrower / investor that was doing a loan and they have priced the property, they went upon the advice above and looked at actives and solds and under contract and rather than dropping the property by $5,000, which would be normally done, they dropped the property by $15,000. The reason that is important, obviously they want to make money and do the best they can, however, you do not want to chase the market because you will never win.
By chasing the market, what I am talking about is, if they reduce the price by $5,000 then what would happened is the next month they have to reduce the price by another $5,000 and the next month they will reduce the price by another $5,000 therefore chasing the markets. Always reduce the price slower than the market is dropping. If that is the case you have to make a drastic reduction. They did that. They now are getting a lot of showings and they are going to be seeing an offer pretty shortly on that. They have just barely done this. But, in regards to chasing the market, you need to be ahead of the market not behind it; and you have to be the best looking property at the lowest price - these are properties that are going to sell. You want to look for properties that are in the right demographic price range where you are going to have the most probabilities of selling. So I hope these tips have helped; something we have learned in visiting with Texas Private Money Lenders. I hope this can help you in valuing your property; whether you are in Texas or whether you are anywhere else in United States the principles remain the same.
