All Forum Posts by: Hendra Wijaya

@Hendra Wijaya firstly, it may make sense to factor small consumable items in your underwriting, but lump it all into one miscellaneous line item.

Secondly, they should all be under opex and not capex. The label doesn’t matter when you’re underwriting for acquisitions, but the fact that you’re mixing it up means you need to do more studying to understand the difference for tax purposes.

While you’re at it, it’ll be beneficial to learn about Safe Harbors that allow you to expense items that are normally capitalized - there are a few and these Safe Harbors are very powerful.

I would never have a line-item for small things like light bulbs in my budget, otherwise, the budget would be 100 pages long. 

On the other hand, I would never expect a resident to change filters or toilet flappers, although they may change light bulbs.  It is often better to give the resident "free" preventative maintenance items such as new furnace filters because it prolongs the useful life of your major equipment.  It also gives you the opportunity to check on the property at least 2x per year and you can note any lease violations or other problems.

It definitely ranges because every property is unique. A couple of things to think about:

A deal isn't defined by how much lower you got the property in comparison to the list price. The list price is just the starting number. Nothing more. 

The days on market play a huge role. Trying to lowball a seller based when it just hit the market is likely a waste of time. 

For example, to Eliott's point, if the property just hit the market, and the numbers worked paying $10K over asking, then why not take it? Everyone wins.

When I have offered less, typically it ends up between 5%-10% below list. Of course some are more and some are over. It just depends. Whatever it takes to make the numbers work

You need to rephrase your question. There’s a difference between a lowball, and an offer that makes sense to you given your criteria. My criteria is 70%, meaning I need to purchase the property 30% under market value all in with construction.

It's not about the asking price vs the offer, it's about the reasoning behind the valuation. Occasionally you will run into a seller whose property is worth $600k, but they're asking $1 million. You can lay out the logic of your offer, negotiate, and so on. However, if the property is actually worth $1 million and you're offering $600k, you're just wasting your time and energy, hoping to run into a sucker.

It's all about addressing sellers' pain points. By addressing their pain points, you put yourself in a position to get a better price.

Lowballing for the sake of lowballing is just going to result in frustration and a lot of lost offers.

Focus on solving their problem - maybe they're in a tight spot and need a quick sale? In that case, you may be able to get a more attractive value by offering a fast cash close.