The Personal Finance Podcast - How to Sell a House for Double What you Paid For It

Episode Date: November 25, 2020

Episode 29: How to Sell a House for Double What you Paid For It In this episode we cover:  How to buy a house right  How to choose an agent  How to get your house ready to sell  When is the right time to sell  RESOURCES: How to Buy a House and Have Instant Equity Podcast Episode  How to Buy a house article M1 Finance Best Place to Invest  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) ** Some links may be affiliate links and we earn a small commission at no extra cost to you. We only recommend products we truly believe in.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew, founder of dollar after dollar.com. And today on the personal finance podcast, we're going to talk about how to sell your house for double what you paid for it. And we're talking about this today because I just sold my house. is fresh in my mind and I want to share you guys some insights on what I did to be able to sell my house for double what I paid for it. And I'm a licensed realtor in the state of Florida. So that also helps me save some money as I sell my house. But at the same time, I've done this numerous times. I've done this with my investment properties. I've done this with my single family

houses that I've rented out. I've done it for clients and I've talked to people about how to do this to be able to sell your house for maximum value. But there is a little bit of skill in doing this and you have to have some patience and the combination of the two is going to allow you to have a bulletproof plan when you're ready to sell your house and that's what we're going to talk about in this episode we're going to talk about how to buy your house so that when you sell it you're going to be able to sell it for maximum dollar and we're going to talk about when to know when the best time to sell your house is and then when it's time to sell what do you do to get your house ready what are the things you have to do to ensure that you can get the maximum value for your

and then how to choose a realtor. And then finally, the last piece is just a process of selling your house. So we're going to talk about all those things today. So let's get into it. So the first step to selling your house for double what you paid for it is to make sure that you buy your house right. Now, in any real estate transaction, whether you're buying a rental property or you're going to flip a house or you're buying a house to live in for the long run, you have to buy your house right.

You make all of your money on your houses going into the transaction. So remember this. Anytime you're going to buy a house, you make all of your money going into the transaction. And it is so important to buy a house right. Because if you don't buy a house right, you're going to be playing catch up the entire time that you own that asset. Or the entire time that you live in that house. And it's going to be very difficult to sell your house for maximum dollar if you don't buy it right. So what are a couple of tips to look for to buy the house right?

The number one thing, and this is what I always talk about, and we talked about this in the How to Buy a House episode, is you want to find the worst house in the best neighborhood. Now, what do I mean by that? You want to find the best neighborhood that you can afford with the crappiest house in that neighborhood. Because what you want to do with that house is you want to roll up those sleeves

and you want to get to renovating. Why do you want to do that? Because when you renovate a house, you're forcing value into that house and you're forcing appreciation into that house. And this is where you're going to maximize your value. So you're going to have to have some vision. You're going to have to be able to see that you can change the color of the paint color.

You can change the color of the green tile in the middle of the bathroom. You can change the floors. You're going to have to understand that. And as you walk through the house, say, hey, what would it look like if I changed this paint color? Or what would this house look like if I took out this rug and just look and see what would happen? And sometimes, sometimes you walk into some of these houses, especially if it's an investment property, if you're going to flip it or something like that. And you may walk into a hoarder house.

I've done this a million times. And there's stuff everywhere. And it's almost impossible to envision it. But if you can just clear that in your head and say, hey, I can do this. I can do this. And change certain things. It's going to open up the possibilities for you to make a lot of money when it's time to sell the house. Now, the issues that you want the house to have are cosmetic issues.

You don't want the house to have a lot of structural issues, things like the roof or the plumbing. You don't want to have a ton of issues within that realm. Now, you can have some, and sometimes those are the best deals, but if you're not a seasoned real estate investor, or if you're not seasoned in buying houses, then I would stay away from that, especially if it's your first transaction or if it's your first house. Just look for cosmetic issues. And that's what my wife and I did on our first house. The walls were purple. The carpets were shaggy. The tile in the bathroom was pink. And we literally changed the entire house. The outside color was green. We painted the outside color. We ripped the carpet out, put wood floors in. We changed all

the walls to a light gray. And that is how you start to make renovations that are going to appreciate and force value into the home. And don't be afraid to do some of the work yourself. I mean, some of this stuff like painting walls and things like that, you can do yourself. If you can't afford it, it's a lot cheaper to do it yourself. So consider doing that as well as you're doing these renovations. And then don't let your emotions get involved in your decision making. I know a flipped house looks beautiful, but you're going to be paying top dollar for a flipped house. You're going to be paying top dollar if the house was just renovated.

Why? Because that person is making double on the house, not you. So what's happening here is you're giving your profit to that person, whoever flipped the house. But if you can find a house that needs some cosmetic renovations, and even if you can't afford all of it, you can start to do the things that matter most to you at the beginning, the things that bring you value. and then over time you'll have money to renovate the house.

But using that vision, using the vision that you see that potential inside of that house is going to enforce the appreciation of that house, especially if you buy it in the right neighborhood. But obviously in real estate, it's location, location, location. They say that over and over and over again, and that still stands true. So if you find a great neighborhood with a house that needs some work, then you're almost guaranteed to make money on that house if you sell it at the right time.

And number two is know when it is time to sell. because understanding when you need to sell is half the battle, especially in situations where you're trying to make money on your house. So if it's a flip or a rental, a flip obviously, you're going to try to renovate it as fast as you can and sell it right away. But one thing I like to do, especially when I invest in real estate, is I like to do what I call a rent-in flip. So a lot of times what I'll do is I'll find a single family house that needs a little bit of work. And sometimes it already has tenants in it. And it's a tired landlord that doesn't want to deal with the tenants anymore. and after the lease is up, I'll let the tenants leave, then I'll go renovate the house and sell the house.

But what happens there is if you're in a good market, the house appreciates over that year, and it appreciates for much more than you paid for it. And then you're forcing the value into that house and allowing the renovations to skyrocket the value of that house. So what happens here is it's an equation of time plus your renovations that are going to absolutely skyrocket the value of that house. And I've doubled my money on houses many of times just by doing that alone. by using this strategy. And sometimes you can keep renting the house out and all of a sudden the cash flow is great. You want to keep it as a rental. So it's a win-win situation because if the house is cash flowing, you have two options. You can either sell the house or you can maintain that

cash flow and keep the house. And if you're thinking about selling your personal home, you just have to be patient and know when the right time to sell is. Because let's say we're in the middle of a recession. That is not the right time to sell at your house unless you absolutely have to. Maybe you're facing foreclosure or something else like that, then maybe that would be the right time. But if you're trying to double your money, if you're trying to make money on your house and make money on the appreciation, then it may not be the best time to sell your house. Because recessions, the values have dropped. And demand has become much lower because the values have dropped because most people lose their jobs and it's a compound effect. But when we're in a booming economy, then you're looking

at a situation that would be a great time to sell. Or when interest rates are low, that's another great time to sell because there's a lot of buyers out there. So what happens is there's low inventory because all these buyers are buying these houses and you have the opportunity to sell. And you're going to get a ton of offers all at once if you sell at the right time. A time to sell would be when your home equity is at a price that you just cannot refuse, such as double the price that you paid for it. So a lot of times what I would look at would say, hey, my home equity just rose 25%. Would I be willing to sell this house for 25% and deal with the hassle of moving and doing all these other things? No. Okay, what about 50%. Would I be willing to sell that 50%? Now I'm thinking about it.

then my house value hit 75% appreciation now i'm really going to be thinking about it and then once i looked at the comps in the area and it was it was going up to double then i was like there's no way i'm selling right now i can't i can't wait anymore i don't want to miss this opportunity and it just happened at the same time that you know my family was growing and things were happening so it ended up being the perfect storm but for a lot of people they wait too long and they say yeah i'll sell my house later on i don't want to deal with the hassle right now of moving and things like that but if the depreciation and the value is just too much for you to refuse, then it's probably time to sell your house. Say you bought $100,000 house and the values in your neighborhood are going for, say, $2.20.

Well, now, that's probably a good time to sell your house because the home values are doubling. So just consider what type of market you're in so you can think through this process. It's obviously impossible to time it. It's impossible to know what's going to happen ahead. But it could be the time to sell once the value of your home is at a price that you can't refuse. But don't just sell for the money. Because if you love your house and you plan on being in your house forever, just because your house doubles doesn't mean you should sell it because that house truly brings you value.

If you're in a neighborhood, you love, you love your neighbors, you love the community that you're in, and you love the house, then why would you sell the house just for money? That's not a house that you want to sell. That's a house that you want to keep. If you want to stay in that house in the long run, maybe you raise your kids in that house or your kids love that house and you just want to keep that house in your family forever, then there's no reason to sell the house. just because the value doubled or tripled or whatever else happens.

So think through what brings you value. And if your house brings you true value, then it's not time to sell for you. And then one other indicator that may make you want to sell your house is if you see that the neighborhood is going in the wrong direction. So you see a lot of new people buying houses in the neighborhood and maybe they're not taking care of the lawns or the houses are not being painted on the outside. And the neighborhood looks like it's going in the wrong direction. That may be an indicator that it's time to sell because this happens all the time.

neighborhoods change. And if the neighborhood changes and people aren't taking care of their houses, that's going to drive the value of your house down. And if you watch comps in your area and you see that house values are dropping, then that may be an indicator that it may be time to sell and move on to a new neighborhood. Now let's get into what you need to do when it's time to sell your house. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy, clothes don't fit anymore, and routines are changing. and it just hits you. Life is expanding. And when your life grows, your responsibility grows with it. That's something I've been thinking about more this spring, making sure the safety net we have in place

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That's the first thing you want to do because that's actually going to increase the value. alone just painting the outside and the inside. So make sure you just get neutral colors into your house and paint the walls. But if there's anything else outdated, like your floors are outdated, you know it, or your appliances are outdated. Make sure you're updating those things. And that's why it's important to do it over time and making a budget for your home furnishings so that you're able to update it over time, because allowing those updates to happen is going to increase the value of your home when it's time to sell. You don't have to do so much if you're doing it over time. So if you're like, hey, maybe I'll sell in five years, start updating things now slowly.

Do it over time. And look at the big rooms. Look at your kitchen. Look at the bathrooms. Look at the master bedroom. These rooms are going to matter to people. And you want them to be as nice as possible because that's what's going to increase the value of your home. And that is what's going to allow you to sell the home faster.

The second thing is to fix the little things. So a lot of people skip this step. But fixing that door that's jammed that just really doesn't open right or the window that completely won't open or that drawer that's just real shaky when you open it. Fixing all the little things matters because you want the homeowner to know that when they move into that house, they bought that house from a homeowner who cared. And a lot of times people will notice when they walk through the house when it's up for sale. A lot of people open a lot of drawers. They open a lot of doors. They try out everything. You'd be amazed at what people do when they look at your house. So you want to make

sure that everything is fixed, even the small little things. And you know what they are. Only you know what they are because they bother you too when you're going through your house. So just make sure you're considering that and looking at the small things and just make a checklist and knock each one out. And the best way to do that, again, is over time. When something breaks, just fix it right away. One of my big rules that I had was after things break, I need to do it within seven days. It needs to be fixed within seven days because when I first bought my house, I would let things sit there for way too long, two, three months. So now my rule is if something breaks and I know it's broken, say a door latch just doesn't work perfectly. I need to fix that within seven days. And that's a good rule of thumb

because it allowed me to get everything done. And now I have nothing to worry about when it's time to sell the house. And then again, go through your house and look at the paint color. Just make sure all your paint colors are neutral colors, whites, or real light grays. And then look at the outside of the house. Make sure it's a decent color, not some funky color that you like. Just make sure it's a decent color. Then update the landscaping. All these things matter. Making sure you have curb appeal with the landscaping. Make sure all the mulch is fresh and just freshening up everything. And a lot of this stuff doesn't cost as much as you think. As long as you're just freshening things up, if it already looks good and if you've been doing it over time, then you have nothing to worry about.

But if you're completely renovating your house that you left dilapidated that you've been living in, then you're going to have a higher cost. So that's why it's important to do this over time. And then just making sure you're maintaining keeping the house clean. That's one big thing as well. Because as you go through this process, dirt can stick. And if you're not making sure your house is clean or you don't have the habit of making sure your house is clean, it's going to be much harder to sell a house that's someone. what dirty. And I've seen way too many houses that I've walked into where they're just completely dirty. And it's a complete turnoff to the buyer because the house is dirty. You want it to look like

a magazine when they walk in there. And that's the key to this. And then your next step is to interview agents. Now, can you sell a house for sale by owner? Absolutely. And that's an option that you may have. And you can do some of those low cost brokerages or things like that. But a lot of times an agent can get more money for you. And a lot of people think they can sell their own house. But an agent's really going to help you along the way. And I know that The cost for an agent for a seller is extremely high. I understand that. In a lot of places, it's between 5 to 6% that you're going to pay your agent of the sale price.

So if you sell a house for $100,000, you're going to be paying that agent $6,000. So just think about every $100,000 is $6,000. And I know that cost sounds high. But a lot of studies have been done showing that agents can get you a higher purchase price. But maybe you've been an agent in the past or you are extremely good at sales or something like that. then maybe you want to do one of those low-cost brokerages where you pay $200, they listed in the MLS, and then you sell it yourself. Maybe that's an option for you. And if you think you can do that,

more power to you. But just know, looking for an agent is a process. And you just want to find an agent that clicks with you. So you can interview a couple of agents, have them come to your house, they'll do a presentation, they'll tell you exactly what they would do with the house and how they would sell it. And then just pick the right one that you feel like you clicked with. A lot of people resort to like family friends or someone that's been recommended. And that's great as well. but just interview a couple of extra agents just so you know that you made the right decision because the last thing you want to do is have the wrong agent and be paying someone a significant sum of your sale price just because someone recommended them.

And then once you hire your agent, you're going to come up with a price that you want to list the house for. And once the house is listed, what I always recommend is to list it for just a little bit more than you think it's worth because almost every single time that I've done that, I've gotten the price that I've been asking for, almost every single time. and I would have never gotten that price if I didn't list it for just a little bit more than I thought it was worth. Now, if you have an

aggressive agent, they're going to list the price higher anyways because they're going to try to sell the price at a much higher rate. But if you have a lazy agent, they may be bringing the price down a little bit. So just make sure they show you comps and comparables of the neighborhoods so that you can sell the house at the highest price

possible. And then from there, you're going to be fielding offers and listing the house for sale. Once it's for sale, making sure your agent has open houses and things like that. But all those pieces matter less than the preparation that you do beforehand. Buying the house right, making sure that you do the proper renovations that truly matter, and making sure you're updating the house constantly within your budget. So making sure you have a budget that you can afford each upgrade that you're doing, and then performing those upgrades that matter that really drive the price of the house up. And then knowing when it's

time to sell, selling at the right time for your family, not selling when you emotionally just want to buy a new bigger house when you don't need it, but selling when it's the right time for you and your family and selling when you know you have enough equity in the house if the house doesn't really bring you value those are the keys the preparation is the key and what you're doing there is you're just making the sale easy because once you get to that point when i just listed my house i had 11 offers over asking within the first two days and that's because i just completed all these steps and over time i updated my house and that's how you have to do it you just have to do it slowly over time so listen i hope these tips helped you guys if you haven't listened to the how to buy a house

go ahead and listen to that. I'll leave a link to it in the show notes. In addition, we're going to have a bunch of real estate investing content coming up. So if you're interested in that as well, make sure you subscribe, share it with a friend, and spread this message because we believe that money equals freedom. Thank you guys so much for listening. And if this is your first time listening, consider subscribing so you never miss an episode. And share this episode with a friend. And don't forget to leave a rating and review on iTunes as well, because our goal is to bring as much you to you as possible. And we're trying to spread this message that money can buy freedom. That's what money is there to do is to buy more freedom. So thank you again so much for

listening and I hope you have a great day.