3 Property Analysis Hacks to Increase Your Offer

Want more deals? More MLS offers, more on marketing, more networking . These help generate leads. I often hear the question “where do you find your leads!?!” but rarely “how are you analyzing your leads?”

No matter how outstanding your marketing is, you should assume it’s a multiple offer scenario. You are bidding against another buyer. Although certain “whale cash buyers” may out bid you, it’s necessary (if serious about consistent deal flow) to think outside the box when formulating an offer. If you’re just hopping on Zillow, pulling up comps, and running some formula – that won’t out-bid your competitors. Everywhere wholesaler is doing that exact thing.

Investing means calculated financial risk. Running a 70% rule on a Zestimate isn’t much calculation. Buying/wholesaling/renting only “sure thing” scenarios isn’t much risk.

Scenarios periodically arise calling for extra attention to ensure you are making your best offer. I do not mean “stretching” your ROI or investment metrics, I mean carefully exploring possible property uses to uncover opportunity to meet your metrics that random wholesalers aren’t looking at. Here are a few “hacks” to push offers higher without sacrificing metrics:

Zoning & Variance: Most wholesalers and cash buyers look at property as it stands. If it’s a single-family, look at single-family house comps. If it’s a multi-family, look at multi-family comps and calculate cap rates. “Software” that generates property values (allegedly to make your life easier) functions like this: (1) look at property use, (2) look at property size, (3) generate price/offer by averaging the same property uses of this size. If you’re analysis is that basic, good sign you need to pay more attention.

Consider – not how the property used – but all permitted and unpermitted uses. Here is an example. I’m in negotiation to purchase a single-family house. When I did my initial inspection, it was clear this was a knock-down. I didn’t view the knock-down as a problem – but a e-building opportunity. I looked up the zoning – and on this land you can build 60 dwelling units/acre. The lot is 9,200 sq/ft (quite large for a single-family in this neighborhood) and it’s a strong rental neighborhood with surrounding areas with well rented duplex and triplex. My strategy will be to treat this house as new 4-unit development. Check out zoning rules here.

Multi-Level ARV: How often do people talk about “what’s the ARV”? I’m guessing you hear that a lot if you attend REIA or cruise these forums. The question is primitive. The real question: sale value at different repair levels. You could spend $20k, $30k, and $40k to reach various levels of repair. If the neighborhood dynamic is low level finishing sell nearly as well as high level finishing – why shoot for the highest ARV? Spending an extra $20,000 to increase re-sale value by $20,000 doesn’t make sense. If you actually run numbers for your ROI, spending “less” on repairs often means completing the deal faster. Completing faster means less taxes, insurance, utilities, and financing interest.

CRA & Urban Development Areas: Rentals have two goals: cash flow and appreciation. Cash flow is easy to calculate. Appreciation is not. Appreciation is a more “advanced” skill that requires forecasting. The simplest way to target appreciation is to look where the government is funneling money. Community re-development associations providing funding and/or lending to developers and/or rehabbers. Urban Development Areas often have unique zoning rules creating opportunity for developers. If you’re rental goal is a 10cap, and you can buy at an 8cap in a CRA, the potential for appreciation has a lot more expected value than the 2%.