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Updated almost 6 years ago,
Do you low ball, or make sure you secure the deal?
This is in terms of buy and hold, or BRRRR....But when submitting an offer on a property that is priced well, let say exactly what it's worth, $100k. You run all your numbers, conservatively, and at $100k, plus renovations, this property will cash flow your target number, let's call it $250/month after you refinance. We'll call it a B/C neighborhood so there is some long term appreciation possibilities.
Do you:
A: Bid 100k, thinking there is a chance you’ll be the only one at full asking and cash.
B: Bid $90k, because $10k less is $10k less and your here for a deal. You’ll cash flow an extra $50/month, but there’s a chance that you are outbid.
C. Bid $110k, because it’s only $10k, you’ll cash flow $50/less, but there’s a pretty good chance you’ll be the highest bidder.
D. None of the above, explain what you would do.
Ready, go. And why?
A few disclaimers. There are obviously other factors, but imagine this is similar to other properties in your portfolio and try to focus on price alone, and whether you want to get the best deal, or make sure you get the property. This is for a BRRRR scenario, so it's a long term hold and you'll get most of your cash back out, so the 10k you spend or save is financed money. Use your current market conditions, and if that will affect your answer compared to maybe another time let us know. Let's assume you are one of 3 offers.
I’m excited to hear the wide range of answers BP is bound to deliver!