|Pigs Get Fat And Hogs Get Slaughtered
One of my wholesale buyers recently called me up and was complaining about a house he bought
from me a little less than a year ago. He called because he couldn't figure out why it was still
sitting in his inventory.
Let me give you a little background information...
It was a cherry rehab deal with about $20,000 of net net profit at the end of the rainbow in
a bread and butter neighborhood.
It needed the basics carpet, paint, updated kitchen appliances, and a good through cleaning.
It would have easily sold to a retail buyer for $124,900 with the above repairs.
When I sold him the property houses were sitting on the market for less than 45 days.
Given the repairs that were needed he should have been able to easily turn this housein
60-90 days with his eyes closed.
Instead of pricing the property where it should have been priced he thought he would push
the limits and bump the price to $134,900 increasing his net net margin, at least in theory, to
$30,000. There were some comps that would have supported this price point; however he needed to spend
an additional $7,000 to $8,000 on the repairs and updates to level the playing field with the comps
that would have supported this price.
I don't know about you, but an additional investment of $7,000 to $8,000, and my time isn't
worth an additional $2,000 to $3,000 on my bottom line.
About two weeks after he completed the property and stuck it on the open market I stopped by
the house to take a look at his handy work while I was in the area and noticed he had it listed for
$134,900. Several days later he called to ask me what I thought of the property and I told him point
blank, "Pigs Get Fat and Hogs Get Slaughtered," and you're going to the chopping block.
I know this sounds a little harsh, but we had already discussed in detail the repairs that
needed to be made to get the most bang for his buck and time.
Now he's been the proud owner of a vacant rehabbed property with a $134,900 price tag, he was
too proud to drop his price, for the past 10 months and he's been bleeding about $1,500 dollars a
month during that time.
Do the math… his $20,000 margin has dwindled to $5,000, and I'm guessing he will be lucky
to break even at this point even if he sells the property in the next 60 days.
Don't get me wrong I'm all for aggressively pricing a property, but if I'm not getting any
activity in the first 30 days I make the proper adjustments so I can cash out and move to the next
$20,000 to $30,000 pay day.
There are several examples in "Case Studies To Ca$h" where I cover this very topic.
Check it out at
"Case Studies To Ca$h"
Bottom Line: Don't get greedy!
To Your Success,
Copyright, Rocky Mountain Publishing LLC 2005
Rocky Mountain Publishing LLC
3020 Legacy Drive, Suite 100-263
Plano, TX 75023
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