New member into and short sale question

[Jonathan H.]

Hi everyone,

My name is Jonathan and I'm from PA. I bought a home two years ago and have been doing really well renting out the other rooms in my house...which got me thinking about buying a rental property.

Long story short, I found a 4 unit property about 10 minutes from my house that is very tempting. I've crunched the numbers over and over again and the cash flow should be decent. I'm well in the clear considering both the 2% rule and the 50% rule. I got to see the property last week and it's in decent shape. New roof, seperate utilities (including heat), could use some updating inside, but it's totally livable. It's also fully occupied.

Anyway, this property is a short sale, which I have no experience with. I know that the owner needs to sign off on the deal and then the bank needs to approve, but how much lower than asking would you offer? Is there a percentage lower you would go with?

The numbers make sense at the current asking price, but I'm obviously going to come in way under that...because it's an investment and I'm looking for the best deal. I'm thinking of making my first offer at 33% off the asking. I would be afraid of insulting the owner if it was a normal deal. But he's already losing the house and I'm obviously not going to be worried about insulting the bank.

Thoughts?

Btw, thanks to everyone that contributes to this site. I have found it to be the single greatest resource I have used while considering real estate investments.

[Account Closed]

I don't think there is a rule regarding how much below you should offer. I've seen MLS listings say owner will not consider offers less than 80% of asking, I've heard some lenders say they won't accept anything less than 90% of asking. At the end of the day it has to be something you can live with, i.e., the numbers work for your investment criteria.

Interestingly, in my area, looking at the sold short sales, the final sale price is greater than the asking price in a lot of cases. That tells me the reo owner is listing below market to get offers than negotiates up. Don't know how true that is across the board.