Offer formula

[Robert Shoffner]

I am in the Charlotte NC market which is way overheated right now. There is not a lot of inventory on the MLS, courthouse foreclosures are going for retail prices, and homeowners are receiving 10 letters from different investors. It's kind of crazy, actually. I am finding the classic 65% or 70% ARV formula is not working . Investors are paying top dollar and getting slim margins on their profit.

My question revolves around what to pay as an investor in this market situation. Should I simply look for the houses in the area that are cheapest and offer to buy for 10-15% less, and then either rehab or wholesale?  Logic seems to be out the window around here. It's either pay more than the guy who is willing to overpay or just miss the deal.

Any feedback from seasoned investors who have been doing this a long time would be much appreciated.

[Jeffrey H.]

I basically had the same problem in Houston, and quit investing here because of it.  The market is finally softening with oil prices coming down, and suspect your market will eventually do the same (not because of oil, but something else).

Depending on your strategy you don't want to get stuck with a property you bought high and are underwater.  To me this means short term < 30 day flips or wholesale deals, double closings, etc.  Or - invest elsewhere.

I ended up investing about an hour outside of the city in a smaller town that has a stable population and am doing a cash flow play instead of property appreciation play.