We continue our discussion on pricing an investment property.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: Let’s talk a little bit about pricing investment property. Now, last program, we were talking about if you pick up where the last owner left off and it was a good opportunity, and sustain it, that’s one kind of investment. We also talked about the investment property where you pick up and you basically sweat equity or bring it up to par either in rent or in condition. It’s tough to price for a seller who’s got something that’s behind the marketplace.
Bob Nelson: In other words, there’s something that they should have been doing, and have not done what they should have done in order to make it worth what it reasonably would be worth had they done a good job.
Marcia Edwards: This is very often the case when you see a realtor will say something like, “The rents are this, but they should be at this.”
Bob Nelson: Yeah. Yeah. If it should be, you’re asking me to buy something, take the risk of increasing the income, which during the China virus syndrome, is really difficult, because tenants are having trouble in a number of instances with their employment. They may be employed only part-time, maybe not employed at all. Then we increase the rent on them? I’m not sure if that’s going to be happening. Ethically, morally, and actually, I’m not sure that’s going to happen.
Marcia Edwards: Let’s talk about this. Let’s say I’ve been really kind to my tenants because I didn’t want turnover.
Bob Nelson: Right.
Marcia Edwards: I’m going to go sell my property. I want to sell it for the highest price available. I know that there’ll be turnovers with the transition, where the new owner may have some opportunities to raise that rent to market rent. So can I price it for that eventuality?
Bob Nelson: Yeah. You could, but you would also be a little silly as you do that. Now, in all candor, there comes a point where the seller says, “I won’t take a penny less than such and such.” Then the question comes to you, “Okay. If I understand that’s the price I’m going to have to pay, how much over market reality… not necessarily market, but market reality… am I operating?”
The other side of the coin, “Five years from now, am I going to remember that I overpaid somewhat for that property now that I own it, and no one else does?” Maybe not. So you have that syndrome of, “I really want to buy one. This is the one in the right location and so forth. Do I take a chance, buy it and pay a little too much, or do I just let it go?”
Marcia Edwards: I would encourage you if you’re not sure that you’ve tracked it well during your ownership, to call Bob to talk about assessing and maximizing the sales price.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.