Extending
Posted on April 11, 2007 - Filed Under Business |
It was the title: "How the Klu Klux Klan is like a group of Real Estate Agents".
Freakonomics
Before I get hate mail, keep in mind that someone else wrote the book. Not I.
The author makes many interesting observations. One in particular was regarding the ads used to sell homes. A seller who details physical aspects of the house will typically not negotiate on the price. The opposite, the more general the description the more like the seller will accept a lower price.
Here are some examples:
Detailed Ad: Granite counter tops, marble floors, jacuzzi bathtub.
General Ad: Spacious bedrooms. Nice neighborhood.
How does this apply to my situation?
I’m glad you asked.
There were two properties I decided to bid on. A duplex and a four-plex. Both were very nice, both had positive cashflow. The ads for each property:
Duplex: Refinished kitchen, refinished hardwood floors, new appliances
Fourplex: Spacious bedrooms. Nice neighborhood.
I decided to find out if what the author said in his book was true.
Duplex: Asking $144,000 and I offered $133,000.
Fourplex: Asking $160,000 and I offered $148,000.
The results were interesting.
Duplex: Denied. He went with a higher bid even though the other had really bad credit and had to acquire 100% financing.
Fourplex: Offer accepted.
Of course my initial reaction to the quick acceptance was "I should have offered less!" But how do you know?
Like the last property, the question to be answered was: What’s wrong with this property?
If you liked that post, then try these...
The tool continues on November 21st, 2006
.
Bank Repo on March 7th, 2007
The description for the four-plex said "Bank Repo".
Comments
5 Responses to “Extending”
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I have to echo what someone else said - move the story along quicker. Don’t worry about posting every day. Every two or three days is fine, so long as the saga makes good progress each time. I’d love to hear about your search, but not one iota at a time.
How did you come up with your offering prices? Some people go by the saying “If your first offer doesn’t embarrass you, it’s too high.”
Shaun, this particular post is 4 days boiled down to one post.
After studying the dozens of properties Cat sent my way, I kind of had a feeling for what places might be worth. Not very scientific, I know. But as time progresses, I’ll get better!
Unlike Shaun, I enjoy the daily posting of each chapter in the saga. However, I’m sure all of your readers would like to see the distillation of the projected cash flow on each of these proposed investments. Would you please share the numbers and your analysis of same? Did you get historical appreciation rates for small multui-tenant properties in Corpus Christi? Historical rent trends? That information would be very interesting to your fellow investors.
Interesting choice of words: “Saga”
I did perform an analysis, which will be published one way or the other on Friday. I do have a file, provided by Cat, that shows historical trends in Corpus Christi. Rent trends . . . that information I do not have. I was told a standard increase of 3% in that area would drive tenants away.
I’ll put the information up in a few days.
Oh, I like the daily postings too. I just like to read one story per day! I think the whole 4 months could have been boiled down to one post.
I INVESTIGATED REAL ESTATE IN OTHER STATES. I FLEW INTO ANOTHER STATE. I MADE AN OFFER. I OWN A PROPERTY IN ANOTHER STATE.
THEN, each day, you can write the details…!
I just can’t take the trauma of a cliff hanger before my morning tea!