The right strategy for selling

There are two basic strategies for selling property:

  1. Price it high and wait; or
  2. Price it low and have a bidding war
The second one is much, much better. To understand why, let’s take a look at both.

1. Price it high and wait

The theory behind price is high and wait is that, eventually, someone will come along and pay your price or something to it. Under this theory, there’s no sense in negotiating with yourself (by lowering the price too soon). Just let the property sit out there and a buyer will turn up.

There are a few problems with this strategy. First, your listing will get stale. Most brokers and buyers looking at property check to see what new listings have come on the market. If they see yours sitting around, day after day, they begin to get the sense there’s something wrong with it.

Second, your broker will start caring less and less about your listing. He’s in business to make a buck. If he can see there’s no action on the property, he’s not going to give it his full attention.

Third, you can have an appraisal problem. Even if you get someone to come along and pay your price, the fact it was your only offer may give the appraiser for the buyer’s bank pause.

2. Price it low and have a bidding war

The theory behind pricing it low is the following: You’re going to attract a LOT of interest. Every broker and buyer in the market will notice your property. Seeing a good deal, they will rush to get you offers. Now you’ve got some hot leads.

Assuming you get a bunch of offers, you’re now in the driver seat. What I like to do next is to counter everyone who is in the ballpark on price with the following: I’ll let you do your inspections now, before we go under contract. Then, you give me a non-contingent offer to buy my property for a set price.

The advantage of conducting a sale this way is that you will scare off the tire-kickers and re-traders. Serious buyers will take the risk of spending a few bucks to do their diligence up front. Then they will come back with hard, non-contingent offers. This spares you the haggling that sometimes goes on during the due diligence / contingency period.

Finally, this approach solves your appraisal problem. If an appraiser for the buyer’s bank doubts the value of the property, you can show him that you got a bazillion offers right around the final price. This goes a long way towards making the appraiser comfortable that the bank isn’t getting screwed.

And now, a final note: If you’re interested in selling your apartment building… don’t do it. Seriously. Hold on to your assets if at all possible. But if you really have to sell, give me a call. I’ll either sell it for you or, if I’m not the right person to do it, point you towards someone who is.

About last night…

…I woke up thinking about real estate again.

All I can say is that I feel kind of bad for my (very patient) wife, Lucy, who found herself discussing an apartment deal when, by all rights, she should have been sleeping.

As a percentage of the general population, the people who are intensely interested in this stuff has to be shockingly small. But one of the cool things about the internet is that, because it’s so big, no matter how weird your peculiar little interest is, there’s a community of people just like you.

I’m hoping this site becomes a meeting place for the kind of weirdos who bore their spouses who, frankly, can’t understand why someone would consider a triplex to be relevant pillow talk.

If you’re one of those people, I’d like to meet you. I don’t care if you’re a broker, a lender, an experienced investor, a novice who reads Curbed, a Redfin addict, whatever. If you can’t stop thinking about this stuff, we should talk. Sign up for the mailing list below or else get in touch.

Did you miss out…

…on the fourplex deal I sent out to the mailing list today?

It was a tasty one: A non-rent control fourplex where you put down $106k and get back $30k / year cash(!). In short, it’s homerun value-add deal.

If you want to avoid missing these (infrequent) emails, get on the mailing list.

If you want to find out more about this particular deal, get in touch.

Rising rents

We’ve just turned over a few units in properties in Silver Lake and Echo Park and, boy, is the rental market heating up.

We posted a studio at one property in south Silver Lake right by the border with Echo Park for $1,300 (up from $1,200, I think). The unit and the building are both great. But there’s no parking. And the location, while pretty good, is not A+.

Would you believe we had 20 requests for showings in the first three days after posting the ad, even though it was March (not exactly prime rental time)?

Now, obviously, this is anecdotal. Our properties are not like everyone else’s (they’re much nicer, first of all). But my hunch is that other landlords in the area are feeling demand increase, too.

I’ve said it before but I’ll say it again: The easiest way to make money as a landlord is to buy at a sensible price with a fixed-rate mortgage and have your rents increase. Your costs (property tax and mortgage payments) are mostly fixed. So every $1 of rent increase ends up being pretty much pure profit. And each $1 of rent increase adds $10-12 of value to your building.

Not too shabby.