How can you compete in this market?

Question

Hello all...

I have been searching for a multifamily deal in Fresno, Clovis, and San Luis Obispo CA.  Unfortunately the only funding I have to use is my VA or a seller financed or private money deal.  These markets have proven to be extremely difficult over the past 6 months and all my offers have been denied.  I even offered a price that only got me $70/door after the analysis.  I've checked and I'm confident my analysis isn't the problem.  Every deal I offer on someone else buys with cash.  I live on a single income with 4 kids... I'll never purchase a home in cash until I can start building wealth in real estate.  So my question is how does one compete with cash offers when looking to house hack by using the VA.  I can imagine the answers may be, they don't or you just gotta get creative...I get it, I've read the books and have heeded the advice.  It's still not working I am not defeated though, so please share if you can contribute.  Thank you in advance!

Chris Williams · Answer

No offense, but I think the knee-jerk reaction to go to a different market is horrible advise.

The short fall is not the market, it is most likely your approach. If you are simply relying on what is currently available on the open market, you will continue to get the same results you are getting now. Every great real estate investor knows the best deals are found off-market or under-marketed.

There are a couple different approaches ou can take. First, you can go directly to the source (i.e.,the owners). Pull a list of property owners in the areas that you desire to buy. (Check out ListSource.com). Write them a short letter explaining who you are and why you want to buy their property. If as a wholesaler/flipper I do this and get the best deals available, and pick up deals on a weekly basis, there's no reason you can't take the same approach to purchase just one property.

Another approach you can take is to find the agents/brokers who list a lot of the properties that sell on the market. Believe it or not, the overwhelming majority of multi-unit and apartment properties here in Fresno really only go to a handful of agents. So get to know them, be on the top of their mind, and they might possibly send you a listing or two before it hits the market. I tell you, as an agent, I absolutely LOVE getting a property sold before I put it on the market. I don't care what type of financing the buyer is getting, it makes my job so much easier.

Chris Williams · Answer

@Anthony Pellouso, I know several agents who regularly use escalation clauses. Whether something is popular or not does not negate its effectiveness.

Unless you have signed an agency agreement with your agent, it is completely fine if you contact other agents. When contacting listing agents, you don't have to approach them about a specific property, they could keep you posted on any upcoming or off-market pocket listings.

And yes, if you are dealing with multi-units, I would definitely get with an agent who has a lot of experience in that realm.

Anthony P. · Answer

So I ask my agent about the escalation clause and she says: "it's not very popular these days... Most of the time on a hot property with multiple offers, the seller will come back requesting highest and best. That's a more common method.  Best thing to do is to offer what you'd be willing to get the place."

Is this good advice or time to get a new agent?

Russell Brazil · Answer

Use an escalation clause in your offer and escalate $10,000 over a cash offer. (Or more if it is a particularly high priced property). Your agent should be advising you how to make your VA financing offer more competitive to compete against an all cash offer.

Anmmar Alsaggaf · Answer

Great info here. Loved this post.

Claire Fenton · Answer

Hi @Anthony Pellouso,

Have you tried to connect with wholesalers in your community?  They usually want to deal with cash buyers, but not always.  It may be worth a little investigation.  Good luck.

Anthony P. · Answer

thank you for your help I'll take that into consideration.

Anthony P. · Answer

Chris, that's good info and I'm looking into it.  Would you say ethically, it is better for me to contact those agents or for my agent to contact them?

In all reality I probably should just find a new agent who isn't skilled in sfr only and get someone who works more with real estate investors.

Anthony P. · Answer

Russell, thanks for that idea. I'll see if that helps.

How can you compete in this market?

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