Another Newbie Question...

First off thanks to all who participate here in these forums, I've been reading as many posts as I can for the last few days and I am really becoming energized to move on some of these strategies.

I do have a fundamental question about this type of investing in general: if I buy a property for X, invest my money and effort into fixing it up and readying it, then put it on the market for Y price to cover my costs and make a profit, why would a buyer pay my profit margin when he/she can see how much I payed for it (X)? Even if I support part of the price with the upgrades/repairs I made, how can I support the profit number? I guess it depends on the comps and the market in general? My apologies in advance if this is cryptic in any way. Thanks!!! :-?

Comments(5)

  • ncrehabber12th May, 2004

    Most people don't know they can or how to see what you paid for the property.

    This should not keep you from investing in RE.

    ncrehabber

  • jam20012th May, 2004

    The ONLY person that might question your increase in price is the bank. With them, if you can prove that you made improvements via receipts, pictures, and repair bills, you shouldn't have a problem. The typical buyer don't care how much you bought it for, all they care about is if it's worth what they're paying for it. As in, will the house appraise for what you're asking, so they can get financing.

  • jeff1200212th May, 2004

    If you are doing the rehab etc. Why would you even worry about someone knowing how much you paid for the property? If you are offering the home for a fair market price, then the value is there for them whether you made $10 or $10K on the deal. Its you who risked your money and sweat over the deal and worked to get it there. Stop letting others tell you what you're worth! There's nothing stopping them from buying a property that's a mess and making it something to be proud of. if that's what they're looking for, they won't buy your rehabbed property anyway.
    Jeff

  • tjwbills12th May, 2004

    Thanks for the replies, I can see where you all are coming from. I just know that when I go to buy a property I make sure I check how much THEY payed for it but I guess it really doesnt matter if they are at what the market is asking for.

  • rajwarrior12th May, 2004

    It doesn't really matter what THEY, or you paid for the property.

    What matters is that it is being offered at a current fair market value.

    One of the funniest things I see is in the local ad paper when the seller puts something in to the effect of "bought new for $500, sell for $300." Sounds great, except that new price was a few years ago, and you can now buy that item for $200 brand spanking new.

    Real example of a home. I bought for $85k 6 years ago. Now, current market values and a room addition, the FMV is $150-155K. Think it matters that I paid $85K for it? If somebody says to me, "but you only paid $85K for it" my response would be "yes I did. The CURRENT price on this house is $150K. Do you want it or not?"

    Roger

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