In real estate investing, buy low sell high is a very common expression. Though it sounds quite obvious, it is not always easy to buy houses at the right price.

Your buying price must be low enough to make you profits whether you sell them right away or keep them as cash flow properties.

So how do you determine the best price for your property?

A few years ago, it was not un-usual to buy a house at 80 cents on the dollar and wholesale it for a tidy profit because the market supported it. Houses always appreciated in price even within a few months.

Currently, when you buy a house, you should expect the price to go down. Almost everyone who owns a house for a year or more has lost equity in it within that time.

You have to consider this loss when you buy a house. Today, the regular price for wholesale properties is 60 to 65 cents on the dollar minus repairs.

Also, tenants have become more picky and will choose a house with a better rehab job because there are too many houses on the market for rent.

Fir this reason, rental prices have become more competitive.

It is important to make sure the seller knows all these facts when buying houses.

so when talking to a seller, I let them understand that I have to spend money fixing it up, holding it probably for months, then sell it at a deep discount.

And probably I’ll not be able to sell it at all!

I explain that I might lose most of my profits when I hold it. Most sellers will relax when they understand these facts.

I make sure I make this clear before I make any offer. I have come to learn that even though motivated sellers really need to get rid of their properties, they do not like to feel like they are being taken advantage of.

Then I can make my offer comfortably confident that it does not look too low – and in most cases it gets accepted.

Why should you have to explain all this?

Since you have to sell houses lower than we used to a few years ago, you must buy them lower to make money.

You must do this also if you buy properties on terms, such as lease options. You must remember that even though the price for properties that you buy on terms is usually higher, it must still be low enough to cater for the facts above.

This way, in a year or two when you try to sell it, the price at that price will support the sale.

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