Investors often get caught up in price or value or compare that to the profit in a deal. The value is subjective, and actually is in the eye of the beholder. Depending on the type of buyer the value can swing wildly. Here is an example a rehabber might value a $100,000 house at $50,000 because he has to invest $20,000 in repairs, spend more money to sell the home and pay taxes on the capital gain. A Buy and hold investor might value the same house at $80,000 because it will bring $1,200 in rent as it sits today in its current condition.
Have you ever considered a trade for something? Remember as a child, trading a couple sticks of gum for a baseball card? You valued the baseball card more than the gum, and the card owner valued the gum more than the card. Real estate is no different, people trade houses for all kinds of things that they value more than the house. An example would be trading for a motorhome; the seller takes your motorhome in exchange for the equity in his home. In this example the seller wants a motor home more than the equity in his home. In this example, price really did not matter, it was a trade of one tangible item for another, its that simple.
Notes on the other hand, provide a catalyst to make a deal work. More often than not, a note is valued more than the actual real estate to many people. It is important to consider many options when making an offer, don’t assume its just cash that the other party wants.
Have you ever attended LArry’s never Step Into a Bank Again course? You can read more about this course at www.LarryHarbolt.com
