By
Julie A Broad Sitting in a recent real estate investing seminar, I choked when the presenter started using previous list prices as proof that properties on the market today were a great deal.
He pointed to one property saying that last year it was listed for $175,000 more than it's listed for today, so it's a bargain!
This 'expert' presenter was making the same mistake many new investors make, and that is thinking the list price has some relation to actual value. In fact, many real estate investors believe they've purchased a rental property at a good deal just because they managed to purchase it for less than list price.
Don't confuse list price with the real value of a property. In many cases, the listing price is just the wish price of the seller or some lofty value a realtor gave the home in order to convince the sellers to list with them in the first place. It actually doesn't have a foundation based in reality in many cases.
You'll get a better indicator of value by answering the following questions:
What is the cash flow?
What are other properties in the area SELLING for? (Look at properties that are comparable in overall size, number of bedrooms and bathrooms, as well as lot size.)
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.
List price shouldn't factor into your calculations. Neither should the property's assessed value. Neither of those numbers will consistently be a true reflection of what a property is worth. Do your own analysis. Then you can be certain you're getting a good deal... whether you are buying a property for less than list price or not.
For more insider strategies for getting started as a real estate investor, sign up for real estate expert Julie Broad's free
real estate investing newsletter at her website
http://www.revnyou.com Get your free report for making money with real estate when you sign up.
Article Source:
Ignore the List Price - It Means Nothing