Did you know that renters account for around 36% of all households in the United States?
The rental market has been booming worldwide, highlighting the benefits of owning property as an investment. While owning a home has pros and cons, real estate investors are willing to pay above market value to increase their portfolios.
This is why it’s important to ask yourself, how much will an investor pay for my house?
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Here’s everything you need to know about selling your house to an investor.
What is a real estate investor?
A real estate investor is an individual or company dedicated to buying, selling, or holding property. Real estate investors come in various forms but ultimately deal directly in the property market. The most popular kind of real estate investors is property companies that hold rental property that they lease out.
This kind of business invests in real estate for the sole purpose of generating income from the property that it holds. However, there are other property investors, such as those who buy homes to flip them for a profit. These real estate investors buy an undervalued home, upgrade it, and sell it for an instant profit.
Real estate 101 outlines the benefit of investing and holding property over the long term. This is because real estate tends to increase in value with inflation, making it a great way to preserve your entire portfolio. Even if your home does not skyrocket, it’s a valuable asset to diversify your portfolio.
This is why most financial institutions, hedge funds, and investment companies hold some property within their portfolios. Besides the benefits of diversification, property is generally quite a safe investment. In this way, investing in property can help lower the overall risk profile of their portfolio.
Why their cash offers can be low
Real estate investors tend to make slightly lower offers than a property’s market value. This is because they are investors at the end of the day and want to profit from every property. However, these offers can differ depending on what kind of investor they are.
Property investors that want to rent out the property for income will use the potential rental income to help value the property. However, house flippers may look at how much they can eventually sell the home for to see if it’s worth buying it. In this way, it’s important to understand who you’re selling to before finalizing the deal.
Even if you’re not selling to a real estate investor, all-cash offers tend to be slightly lower than homes purchased with a mortgage. This is because there’s less admin to go through to finalize the sale of the property. When you buy a home with a mortgage, there are tons of fees that the bank requests just to set everything up.
Banks and mortgage companies often require an appraisal before finalizing your mortgage, with the costs being added to your mortgage. This ends up making the entire home more expensive.
This is why sellers prefer cash offers when selling their homes. Most cash offers don’t go through real estate agents, making it even better for the seller. This is because you don’t have to give a percentage of your selling price to a real estate agent.
While you may think this is just 2% to 3% of your home’s value, this can be thousands of dollars. However, cash offers cut through all that, saving you money and simultaneously speeding up the entire process.
How different investors price homes
As mentioned above, different kinds of real estate investors value property differently. This is because they use property in different ways to generate income for their business. Here’s a quick look at how different property investors value property.
Flippers
House flippers are real estate investors that buy property for the sole purpose of selling it for a profit. These real estate investors tend to invest some capital in the property to help unlock more value. This helps increase the selling price of the house later on.
When valuing property, house flippers tend to use the 70% rule. This rule states that the flipper will not buy the home for more than 70% of its future market value after deducting renovation costs. In simple terms, if the flipper thinks that after investing $50,000 into the property, they can sell it for $250,000, they won’t buy it for more than $140,000.
Rental property
Real estate investors buying property to rent it out tend to value it differently. This is because they compare the investment to the money they could have left in a savings account. In this way, they evaluate the rental market to see how much money they could generate from the property before making an offer.
Once they know how much they can make from renting the property, they work backward to see its worth. Since the average savings account gives you around 2% in interest every year, they use the rental income as 2% and work back to figure out what 100% is.
For example, if the property generated $24,000 a year in rent, the property would be worth roughly $1.2 million.
iBuyers
iBuyers rely on the latest market data to get accurate valuations for your property. This process considers tons of information, including comparable sales in the area. This way, you can rest assured that you’re getting the best possible deal every time.
While iBuyer.com does link you to property investors, it helps you by valuing your property for you. This means that investors won’t get to rip you off by offering you pennies on the dollar for your home. By working with iBuyer, you can sell your home to a trustworthy investor knowing you’re getting a great deal.
Pros of selling to investors
Selling your home to investors comes with a ton of benefits. These benefits range from saving time to making your life easier when planning your move. Here’s a quick look at why you should consider selling your home to a trustworthy investor.
1. Sell your home as-is
Investors don’t need you to repair or furnish before selling your home. This is because most investors have money to make the space their own after buying it. This way, you can sell your home as-is without worrying about leaving money on the table.
2. Investors pay in cash
Real estate investors tend to offer cash when buying a home. This can help save time during the closing process, making your life easier in the process.
3. Quick closing
As mentioned above, cash offers close a lot quicker than finance sales. Since this is not the first property they may buy, investors tend to have the lawyers and paperwork ready. This means you don’t have to spend money on lawyers but it also speeds up the entire closing process.
Cons of selling to an investor
While there are benefits to selling to an investor, there are a few cons to consider as well. Here’s a quick look at the most notable cons of selling to an investor.
1. Foreign investors take longer to close
Investors close on a property in record time. However, this is not the case for investors out of the country. Since there are laws and regulations around foreign property investment, foreign investors take a bit more time to close a deal.
2. Slightly lower offers
Investors want to make a profit on every sale that they close. This means that they tend to make offers slightly below your home’s market value. While you will lose some value this way, you benefit from selling your home in a fraction of the time.
What about foreclosures and liens?
While you may think that investors won’t want to touch foreclosed homes, the truth is that investors love them. This is because foreclosed homes can often offer the best deals on the market. Since banks and financial institutions aren’t exactly looking to make a profit on the home, you can end up buying a property at a massive discount.
Many agree that investing in foreclosed homes is the best way to start a real estate portfolio. This is because you have the ability to unlock tons of value without having to spend as much money to get started. In this way, foreclosed homes are some of the best properties for investors to look out for.
Are there closing costs associated with investors?
Closing costs are the costs of buying a property that goes above the price of the property itself. In most cases, these costs can range from a few thousand dollars in Indiana to around $30,000 in the District of Columbia. While most of these costs are taxes and legal bills, the truth is that selling to an investor can add some commission fees to the mix.
This is true if you use a platform to find an investor, as the platform takes an added fee. However, this is worth every penny as the platform allows you to sell your home in a fraction of the time that it would have taken you on the open market.
However, there is the possibility to ask the investor to cover some of the closing costs. This is a great way to increase the price of your property to sweeten the deal for yourself.
If you hire a real estate agent to sell my home, there are fees to consider as well. This is why you should take some time to evaluate the various options before you make a final decision.
Find an investor to buy my house
As you can see, selling your home to an investor has many benefits. Besides closing the sale incredibly quickly, you can also save on fees with an all-cash offer. However, how do you find a trustworthy investor to sell your home to?
All-cash offers are great but often too good to be true. This is why it’s important to find a trustworthy buyer to sell your home to. While the open market can give you access to thousands of potential buyers, a few platforms can help you find the perfect buyer for your home.
Platforms like iBuyer.com come with valuable tools to help you determine your home’s value. The information you give them about your home can help them find the perfect investor for your home. This speeds up the entire process, allowing you to sell your home in a fraction of the time it would have taken on the general market.
However, the most beneficial part is that iBuyer.com verifies the investors on the platform. This way, you can rest assured that you are connected to qualified, trustworthy buyers to sell your home to.
Selling your house with iBuyer.com
If you’ve ever asked yourself, how much will an investor pay for my house? The truth is that the property market is incredibly complicated and considers a ton of factors. The most important factor is the property’s market value derived from comparable sales.
While you can pay for a professional appraiser to come and take a closer look at every last detail of your home, this can take an incredibly long time. This is why it’s so beneficial to use platforms like iBuyer.com to help you find trustworthy investors in no time.
