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May 27, 2024 | 2 Minute Read
Many investors find themselves in a tough spot: they’re eager to expand their portfolio, but the lack of available properties and the prospect of paying at or over the asking price seems like a deal killer. Let’s face it, who really wants to pay more than the asking price? Everyone investor loves a good deal, right? So how can investors understand that sometimes more can be a smart move?
How do we persuade them to pull the trigger? And how do we convince sellers to choose them as their buyers, even if it means paying more due to limited inventory?
What if we could answer two critical questions? First, how long will it take for them to break even as a rental property? And secondly, what does the future hold? By leveraging data specific to each zip code’s forecasted appreciation, we can paint a clearer picture for potential buyers.
Consider this scenario: A property listed at $250,000 attracts multiple offers, pushing the bidding price up to $265,000. The property is perfect as a long or short term rental. Naturally, investors hesitate at this increase. But what if we could show them exactly when they’d break even on this investment? By analyzing the projected appreciation for the zip code, we can estimate that at a 4.01% rate, it would take roughly 4.9 months to break even on the increased price. Couple that with a five-year forecast indicating a 4.3% appreciation rate, and suddenly the prospect of paying more seems reasonable.
Let’s look closer into another common objection: waiting for interest rates to drop. The National Association of Realtors reveals that a 1% decrease in rates leads to five million more potential buyers entering the market. So, while waiting for rates to decline may seem reasonable, it could also mean facing stiffer competition and higher prices down the line. In fact, a 7% interest rate might just be a blessing in disguise. By “marrying the home” today and “dating the rate” with the intention of refinancing in the future, investors can capitalize on both current appreciation rates and future rate declines. And, if you decide to sell in the future, you are sitting pretty with a boatload of equity.
But what about those who see a recession on the horizon and fear the impact on real estate? History tells us that real estate often thrives during economic downturns, as lower interest rates stimulate demand. Even a slight increase in unemployment can be offset by the influx of new buyers spurred by lower rates.
It’s about shifting the narrative from short-term costs to long-term gains. By providing data-driven insights and helping investors understand the future potential of the investment, they can see beyond the immediate obstacles and embrace the wealth-building potential of the property. And in doing so, they not only overcome objections but also pave the way to exponentially build their portfolio beyond what they thought possible.
