Middleborough Part 2 | How To sell Using ARV
Ryan: Hey, everybody. I'm here with Mike. We're talking about his most recent house flip in Middleborough, Massachusetts. Mike, in this video, I want to talk about the most exciting part, the sale.
Ryan: Walk us through how you sold this recent property in Middleborough.
Mike: Absolutely, Ryan. In the earlier video, I think I was referring to a sale price of around $200,000 as the exit strategy to get rid of this house a little bit more quickly. Typically, when we price our properties, we try to be below what the market average is anyways, because as investors, we don't want to hang onto properties long.
In this business, markets fluctuate up and down. Sometimes they can trend down, sometimes they can trend up, so that's why we always like to take a conservative approach to the after-repair value. At the time when we were buying this property, we used an after-repair value of right around $200,000 to $210,000, and we were able to get it at the strike price of $120,000, which met our 70% formula that we use.
What happened was we took our time on this property through the winter months, because I really wanted to get this property up on the spring market. I thought we would be able to have the advantage of getting a little bit more money for it. The market was shifting and we were on a little bit of an upswing, and some other reasons. At the end of the day, our strategy worked well, because we just finished the property and we ended up listing it with our real estate broker.
One thing I always recommend is to use a good real estate broker to list your properties. You can try to sell them yourself in the beginning, but what you're going to find as you get busy buying, rehabbing, and selling, finding deals and renovating deals, you want to leave it up to the experts to sell your deals, because you'll end up spending too much time trying to sell it when you should be out there trying to find and get deals for your next flip.
We listed it with a real estate broker and we reran our comps. I want you to pay attention here. When you buy your property, you always want to run your comps, or have a real estate broker do what's known as a CMA, which is a comparative market analysis. What that is, Ryan, is they will go in and find all the recent sales as close to the house you're buying, within a certain mile radius; the closer to the house, the better. Sometimes, they can't always find them that close so they have to reach out further and try to find houses to basically determine what you can sell that house for. It is very important that you get this number right.
Like I said, we were figuring around $210,000. $200,000 would be if we really needed to move it more quickly. Then as we got closer to listing it, we ran those numbers again, and the numbers were coming in higher. The market decided to increase a little bit, inventory was down in Middleborough, and we ended up determining that $224,900 would be a great list price. If we sold it anywhere between $215,000 and $225,000, we would have been very happy, obviously exceeding our expectations.
We had 6 showings in 2 days on that property. The demand was actually better than I even expected. On day-2, we had an offer come in for full price. Obviously, that's great when you can sell your property at full price, and sell it within 2 days.
There's one other thing I want to touch base on, that's very important. You don't always want to get greedy. I know others might tell you to take that offer and call the other 4 or 5 people that were interested in the property and let them know you have an offer in, and we are accepting all offers until the end of that day.
There was another buyer that I know personally who was very interested, and I'm sure he would have put an offer in. The way I look at it is that the buyers, well they were really nice people, the broker was really nice to work with, and they offered full price. To me, it was like they came to bat first, they offered full price; we immediately accepted that offer, and we went to contract.
Don't get greedy, it could backfire on you. Sometimes, you just got to do the right thing. If someone comes to me with a full price offer in writing, I'm going to accept it.
Ryan: Was there anything in particular you did to increase curb appeal on this house, like staging or anything like that?
Mike: Great question. Again, yes, we did stage this property. In this particular one, we tried to take the affordable approach to staging, so we tried something new. My daughter Kaitlin happens to be going to design school; this was her first year. We decided to put her to the test a little bit, and I said, "Here's the house we're doing. Can you stage it?"
My wife, Christina, had helped her a little bit on this one, but she was able to locate furniture at one of those rent-a- centers and get us under a contract for 3 months, for a total rent price of, I think it was $200 a month. For $600, we were able to stage the living room, the kitchen, and some accessories, and so forth. The staging always helps. You've probably heard me say this in other videos, but whenever you can stage, you should stage, because it helps define the space for the people, to help make a better buying decision.
Ryan: All right. Good tips from Mike. We'll see you in the whiteboard videos, where we'll break down the numbers.