The sale of a lake home in one of our local communities which closed last Friday provides proof that success in real estate investing hinges on buying right. The home in question was listed at $399,000 and the sale price was $374,050, or 94.7% of list, which is pretty good these days. But that is not the unusual aspect of the transaction, nor the reason this transaction provides proof of anything.
The interesting aspect, and the proof, is the fact that this very same lake home has now been sold twice this year, and it is only May! Last year this home was on the market listed at $469,000, and after 229 days on market closed on January 16th of this year for $307,000 (65% of list). One week later it went back on the market at the $399,000 list, culminating in the sale closing May 15th for $374,050.
It would seem apparent that the first seller was extremely motivated to take the $307,000 offer, and that the buyer knew he or she was getting a great deal. The difference between the two sale prices, $67,050, is, of course, not all profit. The seller most likely has a commission to pay, plus the real estate transfer fee, title insurance, holding costs, etc., but there still should be a tidy profit remaining ($40,000?) for taking on the risk for four months.
This example ties in nicely to my last post, which compared and contrasted real estate investing and the stock market. In that post I alleged that the stock market investor's critical decision is when to sell, but in real estate, the critical decision is the buy decision.
(Hint to buyers: Now is a pretty good time to make the right buy decision.)