Investors please remember, it is a hyper local market! With all the foreclosures on the market, I can't blame investors for diving in. I am convinced that this is a necessary thing, that these homes can re enter the market as healed properties and help us to move foreward. Investors are often looking at the homes that no one else can handle, or that no one else wants. Put some money into it, put it back on the market and bingo, a paycheck!
Scenario #1 thought process, let me use the listing broker to make an offer, I can probably get the broker to agree to a commission reduction, especially because they can make even better money by re-listing when I am finished with the simple renovations. Problem? Sounds good to me if I were on your side of the fence. However.... 9 times out of 10 the listing broker for foreclosed properties is from out of town, way out of town. Real estate is hyper local. So, you purchased this great deal, you spent a bit to put it in shape with the nod from your agent on pricing. And, lo and behold the house is now overpriced and not selling. Solution? Use a local Realtor® who is knowledgeable about the hyper local market conditions when you are thinking about purchasing the investment in the first place. Run the numbers with your local Realtor® and get the truth. Will you be out-pricing yourself with the improvements?
Prime example, and oh so true. A foreclosure in a very hyper local market. 2 bedrooms, 1 bath turn of the century home on a postage stamp piece of property. Not the pricey neighborhood 2 streets over, historically far lower prices that those larger very beautiful homes a few blocks away. Purchase price I will put at $140,000. Based on information from the cousin who is a realtor 50 miles away, this is a great price! After all, it started $50,000 higher, so it must be worth at least $190,000 if it is fixed up! Mr. Investor puts $50,000 into the house. That puts him $20,000 over the price of the house that sold across the street a month before he purchased his investment in this very hyper local market. A home that the town lists as a 4 bedroom home, it has 2 baths, larger kitchen. OK, so it doesn't have the garage, but, again, this is a very hyper local market, never mind the appraisal issues. Surprised that the CMA given to you by a local Realtor® puts you in the hole?
Scenario #2 thought process, buy a distressed home owner out of the mortgage. Leverage the home and pull money off it since the purchase price was below market value. Distressed homes are often not only distressed money wise, but distressed physically, or shall we say, compromised. Now it's time to sell. And now you find out the property was over leveraged.
This scenario is not so typical, but it is happening. Making decisions as an investor is no different than making decisions as a home owner. Both are large amounts of money that should appreciate in value over time. Should being the key word. Should if the purchase price was appropriate in the first place, should if the market continues to improve, should if regular maintenance is NOT deferred, should if updates are made. And you should have known what the market was all about if a local Realtor® had been contacted.
So, investors, please remember, it is a hyper local market. You will be courting a local Realtor® to sell your investment at some point in time. It would be far wiser to use their expertise up front than to have to listen to your out of town Realtor® tell you that all of those hyper local agents don't know their stuff, they keep complaining the house is overpriced for the local market. If you are looking for an investment property in New Milford, CT please give me a call, I would be happy to assist.
Andrea Swiedler, Realtor, Southern Litchfield County Real Estate
2017 President, Greater New Milford Board of Realtors
2017 Connecticut Magazine 5 Star Realtor
Coldwell Banker Residential Brokerage
Litchfield County Regional Office,375 Danbury Rd, New Milford, CT 06776
© Andrea Swiedler 2009 - 2017
Always do right. This will gratify some people and astonish the rest. - Mark Twain