Advice?? Placing multiple offers, but no takers
New to Real Estate · Jacksonville, NC · Member since 2023 · 16 posts · 19 votes
Hello, I am just starting out and trying to get my first investment property. I am using a conventional loan for financing and putting down 25%. Surprisingly, (to me), I have put in multiple offers on different properties (at asking.. sometimes a little above) but the sellers choose to go with other offers. Additionally, when a REALLY good deal comes up, then I am competing with other investors that can come to the table with all cash. This is pretty discouraging for someone trying to get started. Any words of advice or encouragement? Thank you in advance!
Be patient, do not let the state of your market change the way you run your numbers or make offers. I make 50 offers a week, I don't think twice about them. If they don't get accepted I try to negotiate a win/win, if I can't move on.
If you are SURE you want the deal. Offer a large non-refundable EMD. A non-refundable EMD is worth more than cash because the seller gets paid when you back out. Depending on the property price "large" can be as little as $5-$10k.
Almost everyone that gets mad at sellers for taking cash offers would do the same thing if they were the seller. And even more would once a buyer falls out because they were only “kinda prequalified” or they were really a wholesaler.
The good news is it appears the housing boom is still alive and well in your market.
Ps. As far as your concern about positive cashflow. Anything less than $200/mo is basically zero. If this is a buy and hold, ignore the first 3 years of cashflow. Let’s say it was negative $100/mo. Would you have bought the property for $3600 more? I’m guessing so. You should be raising rents at least $50-100/mo every year and in many places, depending on rents/values $150-$200 might be the norm. 10 years from now you won’t remember what the nets or the cashflow were for the first 3 years. But you will remember if you could have bought it at that price compared to what it is then.
Thank you so much for your advice, Bill! That is a really good point about the EMD and perspective about cash flow and looking at the investment for the long term. I am not angry that sellers prefer the cash offers, just wondering about how to creatively compete until I can get to that level! Thanks again for the great advice!
You can't.
Many of cash buyers are usually private equity firm in disguise, it's known they've entered RE housing in masses, only to sell few mnths later or when time is correct. In our market it used to be common that a house is selling for 560k, a year later it's selling for 660k with zero upgrade.
What you can do is to bid house that they're not interested. Possible.
another thing you can do is timing your buying activity, you can buy between november-december ; and sell between feb to april. This way you would face little competition when buying ; and when you sell your chance of selling higher is quite possible.
I wrote this in another thread, basically this week I'm in another purchase contract, and my secret recipe is simple, I purchase a good house that has a lousy realtor haha LOL, that has been my strategy for the last 3 years, I see lousy realtor really can't sell their client home. No staging, no improvement, no video, and they can't even take pictures for MLS listing, but the house itself is actually good although it needs mild repair. What about comps? The purchase PSF that I purchased is following the 2017 PSF value.
So your best bet: hunt the house that has an agreement with lousy realtors, they are everywhere LOL.
Sometimes market is strange you know, why ? because people thinks the same way, they think if house is not sold within 21 days then it's bad house, sometimes it's not a bad house, it's just they have a lousy listing agent that don't know how to sell.
@Anne Grello Reading between the lines, I assume your not using an analysis "program" of any kind, are you?
It could be something on a 1-page piece of paper you quick fill in the blanks, or like myself something in excel.
It's paramount importance to use one because when you do, it forces one to identify your metrics for a buy AND a correct one identifies your MAO (Maximum Allowable Offer). If your using gut and guess, it's going to allow for a lot of hesitation, feelings of uncertainty and with that, a lot of attempts with a lot of misses.
MJ, Wayne G., yes they lived by the principle of take more shots BUT too many forget they didn't say to do it blind-folded. They had a target, took focus and shot. What's your "target"? How do you focus in on that shot?
Get or make a deal analyzer, set your parameter's, remove emotion from it and make it just a matter of math.
As a side note, if your agent didn't set this up with you it's the first huge red-flag that your using the wrong agent. If your doing REI, one needs a REI Realtor. Right tool for the job "thing".
A person misses 100% of shot's they don't take, but a person also misses 99% of shots they take with a blind-fold. Target, Focus, SHOOT. Repeat.
@Anne Grello I know how that feels! Every offer is an opportunity to learn and it is far better to lose a property than close on a property that you paid too much for.
When your offers get rejected, make sure to put in a backup offer! A lot of homes fall out of contract for reasons that have nothing to do with the property. Your agent may not even think about putting in a backup offer so you may need to stay on top of your agent and tell them ahead of time if you do not get the property to immediately start working on a backup offer. That is how I got my most recent property.
At the end of the day, everything works out just as it should. Just be grateful that you didn't get the other properties because who knows what types of surprises might be in store. Instead, just keep at it and you'll get one right for you. On a slightly more practical note, find an investor who is also a realtor in your area that can find off-market deals with motivated sellers - these are the deals you can get for well below market price and not have to worry about too much competition.
I echo what @James Hamling said. You must have a spreadsheet or program of some sort. I am also an Excel addict.....I make a spreadsheet for everything I am considering oe tracking....
I echo what @James Hamling said. You must have a spreadsheet or program of some sort. I am also an Excel addict.....I make a spreadsheet for everything I am considering oe tracking....
same here. I use google sheets. In fact I use excel/google for any decision making.
Sometimes there's house where you have to bid as high as possible and sometimes there're lot "meeehhhhh" moment.
Excel sheet howver, is the easiest in my eye, my biggest hyper focus is reading 100 pages on disclosure, property inspection report, comps, pest inspection report,/termite inspection and sewer lateral rehab cost if provided. I read every disclosure very carefully. I even understand the comp in certain zip code by memory LOL
@Anne Grello Reading between the lines, I assume your not using an analysis "program" of any kind, are you?
It could be something on a 1-page piece of paper you quick fill in the blanks, or like myself something in excel.
It's paramount importance to use one because when you do, it forces one to identify your metrics for a buy AND a correct one identifies your MAO (Maximum Allowable Offer). If your using gut and guess, it's going to allow for a lot of hesitation, feelings of uncertainty and with that, a lot of attempts with a lot of misses.
MJ, Wayne G., yes they lived by the principle of take more shots BUT too many forget they didn't say to do it blind-folded. They had a target, took focus and shot. What's your "target"? How do you focus in on that shot?
Get or make a deal analyzer, set your parameter's, remove emotion from it and make it just a matter of math.
As a side note, if your agent didn't set this up with you it's the first huge red-flag that your using the wrong agent. If your doing REI, one needs a REI Realtor. Right tool for the job "thing".
A person misses 100% of shot's they don't take, but a person also misses 99% of shots they take with a blind-fold. Target, Focus, SHOOT. Repeat.
Hi James, thank you for the advice. The only analysis tools I have used have been the rent estimators and rental property analysis tools provided by BP. As well as looking at sites like AirDNA, Furnished Finder, AirBNB, Zillow, etc. to gather data and trends about my local market. This was in an attempt to figure out if I wanted/could afford to go into to the LTR niche with this first property or do more of a MTR or STR. This was also how I figured out that purchasing a home (with 25% down and an estimated 8% interest rate for the loan) for much over 200K in a rental market where the average rents are 1100-1450 for a 3B/2B is not going to cash flow at the moment. I definitely do not want to be in the business of making shots in the dark!!
@Anne Grello Reading between the lines, I assume your not using an analysis "program" of any kind, are you?
It could be something on a 1-page piece of paper you quick fill in the blanks, or like myself something in excel.
It's paramount importance to use one because when you do, it forces one to identify your metrics for a buy AND a correct one identifies your MAO (Maximum Allowable Offer). If your using gut and guess, it's going to allow for a lot of hesitation, feelings of uncertainty and with that, a lot of attempts with a lot of misses.
MJ, Wayne G., yes they lived by the principle of take more shots BUT too many forget they didn't say to do it blind-folded. They had a target, took focus and shot. What's your "target"? How do you focus in on that shot?
Get or make a deal analyzer, set your parameter's, remove emotion from it and make it just a matter of math.
As a side note, if your agent didn't set this up with you it's the first huge red-flag that your using the wrong agent. If your doing REI, one needs a REI Realtor. Right tool for the job "thing".
A person misses 100% of shot's they don't take, but a person also misses 99% of shots they take with a blind-fold. Target, Focus, SHOOT. Repeat.
Hi James, thank you for the advice. The only analysis tools I have used have been the rent estimators and rental property analysis tools provided by BP. As well as looking at sites like AirDNA, Furnished Finder, AirBNB, Zillow, etc. to gather data and trends about my local market. This was in an attempt to figure out if I wanted/could afford to go into to the LTR niche with this first property or do more of a MTR or STR. This was also how I figured out that purchasing a home (with 25% down and an estimated 8% interest rate for the loan) for much over 200K in a rental market where the average rents are 1100-1450 for a 3B/2B is not going to cash flow at the moment. I definitely do not want to be in the business of making shots in the dark!!
Ok, this is going to be a hair off topic here but I will try to equip with the short-short version (crash course).
First, you can't be bouncing back and fourth between standard rental and STR, that's a 1st choice of what kind of business do you want to run, a rental housing OR Hospitality business.
Next, with a standard rental there is 4 "profits" you need to think of. There is the net proceeds of rent, the left over $ you can put in your pocket every month. BUT the bigger ones are (a) tenant paydown on mortgage (b) equity accrual via market forces/time (c) this one is HUGE but sooooo many miss it completely; DEPRECIATION and the write-off tax savings value. If your a person of decent regular income, getting slaughtered in taxes every year like most of us, this is a complete game changer when done correctly. I know of many people who are having EPIC "savings" from this alone, I have seen several getting more than $1k per month in tax savings value from a property that otherwise would be a few hundred per month cash-flow. If not using tax-strategy today, a person is probably missing out on the bulk of "profit" potential.
So with that, you need to do the research so you can take all this specific to your situation, and create your metrics for what a "good" buy is.
Or, find a qualified person in your market of interest who can hand-hold you through this, and develop your acquisition strategy.
No plan, is a plan to fail. We NEVER buy investment's the same way we buy a personal use item right. An investment property needs to be treated as such, not a personal residence purchase. It's a business, being a landlord, and the business demands that respect or it coldly will punish those who neglect the business of it. Every business has a detailed, methodical step by step plan where every action has an explicit detailed reason, timing and result of intention. Treat REI the same. Who What When Where Why and How. You must answer all of those in the business plan.
Who will you rent to. What are they looking to rent. When is the opportunity. Where is the market demand. Why does the customer make the choices they do. How can you best connect, convey, deliver value, capitalize.
There is some great advice throughout this thread! One thing I would add is I noticed you said you have been making offers at asking or even slightly above. I would more or less disregard the asking price. The asking price is more of a marketing piece than an actual valuation. Ive seen homes listed significantly below market value in attempts to generate a lot of buyer activity and drive the price above market value with great terms through a bidding war. In those cases if you base your offer around asking price you will most likely come in below your fellow buyers. Have your agent run comps before you offer to make sure your in the ball park.
@Anne Grello I want to buy 2-4 deals a year. I try to make an offer once a week. Just get used to hearing 'no.'
Hello, I am just starting out and trying to get my first investment property. I am using a conventional loan for financing and putting down 25%. Surprisingly, (to me), I have put in multiple offers on different properties (at asking.. sometimes a little above) but the sellers choose to go with other offers. Additionally, when a REALLY good deal comes up, then I am competing with other investors that can come to the table with all cash. This is pretty discouraging for someone trying to get started. Any words of advice or encouragement? Thank you in advance!
Hi, @Anne Grello It sounds like you got great advice. One thing is to track all the offers you submit, even if your offer is rejected. I use alerts on Zillow /realtor to track properties to see what price they were sold off and get more info from my realtor if it was a cash /conventional offer. Do you also submit proof of funds from your lender/bank along with your offer? Generally, it takes 50 offers to analyze, and then submit 25 offers out of it to get 1 offer accepted. So keep submitting offers...
Be patient, do not let the state of your market change the way you run your numbers or make offers. I make 50 offers a week, I don't think twice about them. If they don't get accepted I try to negotiate a win/win, if I can't move on.
Thank you for the advice, Eliott! That is definitely a mind-set I need to adopt and would benefit from
Buying wrong is the fastest way to lose money. Lots of great advice above. Patience and keep building your war chest based on what you have in your plan.
I would also get with some local mastermind groups. So many people know of deals that you don't see or that are off market. Build your network while you look of peers and partners. The network will bring you more than you know.
There is some great advice throughout this thread! One thing I would add is I noticed you said you have been making offers at asking or even slightly above. I would more or less disregard the asking price. The asking price is more of a marketing piece than an actual valuation. Ive seen homes listed significantly below market value in attempts to generate a lot of buyer activity and drive the price above market value with great terms through a bidding war. In those cases if you base your offer around asking price you will most likely come in below your fellow buyers. Have your agent run comps before you offer to make sure your in the ball park.
If they are professional buyer they should know the comps way before submitting bids and should have knowledge way better than the realtor, most realtor don't know how to do comps anyway they only run from localcma dot com or something like that, but they're not expert in neighborhood or price trend, I'm teaching my realtor how to do that and strategize on top of that.
So for the poster, if you want to place a bid:
1. read every disclosure very thoroughly, read property inspection,etc,etc
2. understand local economic, school district,etc
3. understand the comps by heart and sold/listing PSF in last 2 years
4. use your realtor as intel ; ask them to gauge how hot the property is and how strong they would consider your bid
5. try to time your purchase, buy somewhere in Q4 if possible, then competition is much less.
and not all realtors are the same , 95% of them are lousy and only targeting quick sales. Work with different realtor from different brokerage and you can gauge they behave differently as they get paid in different commision structure.
I fired so many realtors :-) at the end when you purchase, everything is on you as a buyer.