September 14, 2026 | 5 Minute Read
Back in June, I listed an as-is property for $155,000 in Roebuck Springs, one of Birmingham’s more affordable and desirable neighborhoods just north of downtown.
A fellow investor had flipped the house next door earlier in the year for $280,000. The two houses were nearly identical.
I had more than 20 showings per week during the first month, but not a single offer.
Why?
Most of the initial showings were from owner-occupants. Given the condition of the property, it was highly unlikely that a conventional lender would finance it without significant repairs being completed first.
The property had structural issues, water and mold damage, outdated electrical and plumbing systems, a failing HVAC unit and plenty of other deferred maintenance. If I were doing the renovation myself, I would have budgeted approximately $75,000+.
So let’s do the math.
- $280,000 ARV
- $196,000 at 70% of ARV
- – $80,000 estimated renovations
- = $116,000 maximum purchase price
.
And remember, renovation costs are one of the biggest factors driving an investor’s offer price.
No investor was going to pay significantly more than that.
In fact, the investor who flipped the identical house next door for $280,000 bought it for just $115,000.
So my $155,000 asking price wasn’t attracting investors, and the condition of the property wasn’t attracting owner-occupants who needed conventional financing.
I told the seller that I believed the ideal buyer was an investor paying cash willing to pay somewhere around $115,000 to $125,000.
The seller, a hedge fund that I represent, wasn’t interested in lowering the price.
As the days on market increased, however, something interesting happened.
Investors started calling.
They were clearly watching the listing and assuming that the longer the property sat on the market, the more flexible the seller would eventually become.
Offers began coming in.
$135,000.
$140,000.
$145,000.
$150,000.
.
Those numbers might seem surprisingly high given the renovation costs.
But there was a strategy behind them.
Many investors will initially offer more to get a property under contract, complete their inspection and then attempt to renegotiate the price based on what they find.
That wasn’t going to work particularly well with this seller.
Because I knew the hedge fund’s policies, I was very clear with the buyers: a price reduction of more than $5,000 after inspection was unlikely.
And that’s exactly what happened.
After inspections, virtually every investor who made an offer came back wanting to reduce the price to somewhere around $110,000 to $115,000.
The seller rejected every one.
Then, on July 18, I received a call from an “investor” from Florida.
Normally, I would tell an investor to find their own buyer’s agent. I’m the listing agent, and I don’t have a lot of time to act as a buyer’s agent for someone who may spend considerable time looking at a property and ultimately submit a lowball offer that the seller will reject.
But after talking with Pete, I realized he was different.
He was serious about buying the property, he understood the condition and the required repairs, and he was paying cash—no hard money, no financing contingency.
He wasn’t deterred by the numbers.
I recommended that he start at $120,000 and told him to expect a counteroffer.
As expected, we went back and forth several times before both sides agreed to $135,000.
Pete then completed his home inspection and sent me the report.
The inspection uncovered exactly what we expected: significant structural and other repair issues.
Pete wanted to renegotiate.
I told him that I didn’t think the seller would accept a lower price. But because I was representing both parties, I still had an obligation to provide him with the best advice I could.
We revised the offer to $125,000 and submitted it with the inspection report documenting the property’s condition.
Normally, the hedge fund responds within 48 hours.
This time, however, the offer sat in the system for several days.
About a week later, Pete had a decision to make.
He could make one final offer with a deadline and be prepared to walk away or buy the house at the original agreed price of $135,000.
We agreed on $130,000 revised final offer.
I resubmitted the offer and told the seller that they had until 5:00 p.m. the same day to respond or the buyer would walk.
At 4:55 p.m., the seller accepted.
Closing was scheduled for September 4.
Pete drove 10 hours from Florida to Birmingham the day before closing so he could personally complete the final walkthrough with me.
Everything looked good.
He overnighted his signed closing documents, wired his funds and we closed the following day.
But Why Did Pete Pay $15,000 More?
Here’s where the story gets interesting.
Earlier, I called Pete an “investor.”
Technically, that’s not really what he is.
Pete and his wife are planning to move to Birmingham in approximately two years to retire.
Yes, they are moving from Florida to Birmingham.
Their plan is to invest approximately $60,000 into the property to make it rent-ready. Once completed, they expect to rent it for approximately $1,700 per month.
After taxes and insurance, Pete estimates that he’ll net approximately $1,300 per month, or about $15,600 per year.
With a total basis of approximately $195,000—$130,000 purchase price plus $60,000 in renovations and other costs—he is targeting roughly an 8% cap rate.
$15,600 annual net income ÷ $195,000 total investment = 8%
And here’s another important part of his strategy:
He isn’t planning to refinance the property and pull his purchase capital back out.
He’s looking at this differently than a traditional investor.
For the next two years, the property will generate rental income while he and his wife prepare for their move to Birmingham.
After the tenant eventually moves out, they plan to sell their Florida property, take the proceeds and invest additional money into the Birmingham house so it can become their primary residence.
That changes everything.
A traditional investor looking at this property needs to make money when they buy it.
Pete was looking at the property as a future home, with two years of rental income along the way.
That’s why he could pay $130,000 when other investors were only willing to pay $110,000 to $115,000.
The Lesson
This transaction is a good reminder that there isn’t always one “right” value for an investment property.
A flipper looks at the purchase price, renovation costs, ARV and resale margin.
A buy-and-hold investor looks at cash flow, debt service, cap rate and long-term appreciation.
An owner-occupant may look at the property completely differently.
Pete had a different exit strategy than every other buyer who looked at the property. That different strategy allowed him to pay more and still make the numbers work.
The lesson for me is simple: don’t assume the highest price a property can command is determined solely by an investor’s traditional underwriting model. Sometimes the best buyer isn’t the one who can make the biggest profit on the property today. It’s the buyer who has a different reason for owning it.