Originally posted by @Pat Brown:
Put a bid on a house just east of 35 good location. House was almost 1400 sq ft and priced at 164,900. Put a bid at 170k and had the high bid but a cash buyer came in and they took that offer.
It could come Back On Market BOM. Which brings a question. If you see a BOM and a Price Drop obviously or maybe not so obviously someone did an inspection and bailed and just lost the Option Money. So would you jump on one of those, hoping like the foundation is not cracked?
A question for those bidding what is the standard rule of Option Money? Is there a formula like (Age of House, Shape of House, Price of House)? Last question what about items that need repair in the house, in a hot market like Round Rock should you just leave those out and lower your price or put them in on say a full price offer or maybe a full price or a little over. I'm asking several questions here so any advice would be helpful.
Hey Pat!
If a cash buyer offered to buy, their advantage over you was a much shorter close time. If you wanted 30 days to close, but they wanted 10, it is of course in the seller's best interest to accept the offer with the shorter close.
What is your exit strategy when looking to buy a home? Are you just trying to wholesale to a cash buyer? Are you trying to buy for yourself, fix it up, and flip at a significantly higher price? Or are you trying to buy, fix it up, and rent out?
If you are buying and re-selling (either wholesale or fix-and-flip), you'll want to deduct about 30-35% from the ARV of the home. You'll also want to deduct repair costs additionally. Repair costs are not an option. If you ignore repair costs, you'll end up with an overvalued house on contract, and a losing buy for any potential investor. In a hot market, investors are looking for guaranteed deals, not speculative projects.
If you are buying and renting, you'll want to ensure your market rent is no less than 1% of your purchase price + repair costs. If a house costs $150,000 to buy, and $30,000 to fix up, you'll want to make sure you can rent the house after repair for at least $1,800. If the market can't support that rental price, drop your purchase price. If you can't drop your purchase price, then walk away from the deal.
Do you have any marketing to draw in off-market deals? Or are you bidding on houses on the MLS? There are many reasons you should not be looking for investment deals on the MLS, the primary reason being price. Houses on the MLS are in tip-top condition and priced at the highest in their market, because they are intended to appeal to consumers looking for personal homes, not to investors.
Have you ever watched any educational resources on real estate investing? If not, I'd recommend Freedom Real Estate Investing or Freedom Mentor on YouTube. Both gurus are great at explaining the basics clearly.
