As a buyer, when is buying a house a good investment strategy? it’s important to recognize the difference between getting a great price and BUYING QUALITY PROPERTIES AT A DISCOUNT. Price is only part of the evaluation of a property. You do not have to look further than some of the bank owned foreclosures and short sales in your market to see the difference. There is a trap that many buyers fall into at some point, and that is leaning toward the best price vs. the best value.
What is Value?
Imagine that you are buying an investment property that you plan on holding for a minimum of 5 years. There are two properties that are essentially the same for you to choose from. Same size, same number of bedrooms, etc. One is priced $15,000 below the other unit. Which one do you purchase? If you say the lower priced one you are not alone. Many experienced buyers and investors would say the same thing and possibly make a mistake. They are choosing price over the other factors that affect value. Here is why you want to buy quality at a discount.
They are priced correctly: Because they are quality and they typically don’t need to be priced below similar sales because they can compete as is. Quality properties will be on the market for a shorter time and sell closer to their asking price.
They are typically in good condition: Less out of pocket cost up front means more capital and higher rental profit early in the investment – which adds to better overall performance. This allows for a quicker turn time because you don’t have to recoup the extra cash.
They will rent sooner and you will have fewer vacancies: If you are buying to live there, the home has likely been cared for on the outside and on the things you don’t see inside within the 4 walls.
First to Sell
Quality properties are the first to sell: In a market with a lot of inventory they are also the first part of the market to begin to appreciate.
Quality properties have a higher upside: In a market that is appreciating the value of EVERYTHING is rising. Values rise, because of a lack of home inventory. When there is little inventory, and the B and C grade properties are appreciating, people will pay a REAL PREMIUM for the quality properties so they don’t have to spend more money on improvements. You can see how value is more important than just price. An experienced real estate advisor in King County can help any buyer become savvy while looking look for the total value in a home. This will always be achieved through buying quality properties at a discount.