Pricing a property can be difficult, especially if you are in the business of reselling. This is when you purchase a low-priced property and try to sell it for a profit. There are several ways to do it, and this tried and tested method will show you how.
Find your price
The very first thing that you need to do is find out what your property is going to sell for on the retail market. The best way to do that is to do a search of all the comparable homes that have sold recently within a quarter of a mile from your property. The highest average price they have sold for is the retail price. As soon as you find out what the retail price is, you need to choose what your exit strategy is going to be.
If you are going to wholesale your property, it’s very simple. You list the property at 50% off the retail price. If you are going to wholesale to another investor, you have to leave enough room for them to make money as well, so the right percentage to entice them in is 50% off retail. If you were going to do it on an example property that retailed at £100,000, it would be good to list it at £49,900.
Now, if you are going to prehab your property, which means you are going to do a very light prehab to make it rental-ready for the buyer, not a full prehab, you are going to be pricing it at 10 to 15% off retail value. In the example house above, the retail price is £100,000. So, if you are going to prehabit it and put £8,000 or less into improving it, you need to price it 10 to 15% off of that retail price. A good figure would be £84,900.
Next, if you’re going to be listing your property and selling it at retail, this is the formula that you are going to use. Clearly, you already know what the other properties are selling for. However, what you should always do if you don’t want it to sit on the market is price it at 95% of its retail value. You can price it as high as 100% or even more, but the higher you price it, the longer it’s going to sit on the market. So, 95% of the value is a great price at £94,900.
On the example property, let’s imagine we decided to prehabit it. Whenever you’re pricing a property, the other thing you need to look at is pricing it attractively. Going with this formula, you could very easily price it at £85,000 or £90,000, but those are not very attractive prices. The attractive price is £84,900 because it sounds a lot cheaper, even though you have only knocked £100 off.