Overcoming Inflation

[Curt Davis]

We have several clients that we have worked with in the past ( on average 2-3yrs ago ) and when we were selling them houses the simple numbers looked like this:

$62,900 sale price with monthly rent of $850-$900.  This was what we were able to provide back then.  Then came the hedge funds and pricing/competition rose drastically.  Even though the funds have stopped buying, homes we get now that rent for $850-$900 are sold  for about $75k-$80k on average.  The cash flow is still good but these older clients are having a hard time grasping that pricing and values have risen that much, it keeps them from buying again. 

 Are there any other property providers who have experienced this same issue?  I try to let them know that prices are still considerably low compared to what these homes were selling to circa 2008.  Just curious. 

[Daniel Miller]

@Curt Davis I have not specifically worked with clients who are hesitant to purchase since the market has rebounded. That being said, if I did have client who were reluctant to make an offer I would simply explain to them that the purchase price should have no bearing on their offer. They need to define what they want out of the deal. The client needs to convey what ROI they are looking for. If you work backwards and start to locate properties that have your clients' coveted ROI they can't argue price with you.

I met a ex-REIT executive one day and we talked for about 15 minutes. Somehow I got on the topic of losing my first deal...a 4-plex that went on the market for $49,000. I offered $59,000 and someone else offered $64,500. I told him about this and he said I made a mistake. I asked, "How?". He stated that I need to define my ROI. I need to locate properties that I like and determine a price that I would be willing to pay based off the ROI I am looking for. He told me to never make an offer based on the list price.

This helped me out a lot...I haven't lost a deal since. (Only been two since but still lol)