Sometimes you can force up the value of your property right out the gate. To do this, many real estate investors use a strategy called a “wedge deal”.
A wedge deal is when an investor buys property under market value and then performs minor repairs to drive up the price.
Oftentimes, an investor manages to get an already cheap house, adds something simple like a new paint job, and then resells the home for a profit. The forced profit from the repairs and the purchase price under market value is called a “wedge”.
A Wedge Deal Example
Let’s say you find a house for sale for $100,000. The property needs a few repairs for the roof and the kitchen.
To create a “wedge deal,” you would offer the seller a price below market value. You would offer something like $80,000.
If the seller accepts, you have created a “$20,000” wedge right out the gate once the minor repairs are completed.
Once you add the repairs, the house’s value may then be worth MORE than the $100,000 it was originally worth.
After repairs, if your house is worth $120,000, you have created a $40,000 wedge.
Examples Of Wedge Deal Repairs
The best property deals are the ones that require minor repairs. The repairs are cheap, but they can boost the value of your property almost instantly.
- Replace the front door. We’ve written articles about this before. We suggest you check out our guide on boosting a property’s value by simply replacing the front door. It’s a great place to create extra value.
- Replacing the roof. Inspectors always check the roof of a home when they perform inspections. Having a new roof increases the chances buyers will be eligible to buy your home with financing.
- Repainting the home. Research shows that there are a few colors that make a home harder to sell. It’s not hard to paint a house, depending on the side. It can be an easy way for you to personally add value to your home.
- Replacing Lights. Believe it or not, the lights on your property can be a gamechanger. They’re not expensive to replace, but they can change the entire character of the house.
Wedge Deals Are Becoming Popular
The “wedge deal” tactic is becoming more popular by the day. It even appears to have become mainstream.
Investor social media influencers like Graham Stephan, Meet Kevin, and others have spent years building their real estate businesses using it. And now they’re letting their followers know how they did it.
As more and more people learn about the tactic, prepare to have competition for these “wedge deals” as you look for homes on the open market. You’re going to have some competition.
It’s only going to get harder from here.
Know Your Numbers
Finding deals in the real estate market is hard. You have to keep your numbers as straight as possible. One bad estimate can cause your real estate project to become a failure.
That’s why we built Rental Property Calculator. Using our tool you can ensure that you’re right. You can use our tool to calculate your numbers and plan your projects accordingly.