IR, why would a smart, experienced real estate agent work with you? Your attitude would not be worth it for me. It seems to me that the most important part of the experience for you is showing your superiority. Only a noob would put up with that.
BTW, I am an active re investor and I manage a re brokerage. My ego gives me no particular need to put you down, but I will assure you that MANY REALTORS can run circles around you in the area of real estate investing.
To paint hundreds of thousands of people (REALTORS) with a single stroke is ignorant. But I am sure that you can also tell us about all Arabs, Chinese, Southerners, middle-aged white males, etc.
Ah, your wisdom and intelligence shines through yet again.
Instead of discussing anything that may have even an inkling of value, you fall back on the good ol’ “I’m right, you’re wrong because I say so.” And let’s not forget the, “maybe it’s time you start being a ‘real’ investor.”
This is what happens with blanket statements and unfounded assumptions; they’re usually wrong. For example, I’m not a realtor. Heck, not even a RE agent. So, have I become useful again?
And if your vision wasn’t impaired, maybe you’d see that again, I didn’t say that low balling was a waste of time, at least in and of itself. What was said was that IF you’re going to make lowball offers on MLS properties that are listed for full value, then expect alot of rejections. It is strictly a numbers game, and since you’re not starting ahead of the curve (ie with something that is already undervalued), expect A LOT of rejections because you are going to be dealing with alot of numbers. If you truly have had success doing this, then I applaud you. You simply must have an awesome way to present your offers.
More than likely, you are already dealing with someone that is selling at a discount and “low-balling” that price. Hardly the same thing.
I can argue all day and I’ll still be right
I believe that right there does say it all.
Raj
Raj,
I get what your saying but I have already aknowledged in another thread on this subject that I expect many rejections but then property manager said you don’t find deals if you don’t make offers and it hit home telling me that I would not be wasting my time.
Thanks for all of your input.
Wow a bunch of “Professional” Realtors are putting me in my place. Nothing they have said is accurate, but why should that matter there just Realtors.
Realtors are a special group. They thought for years they were so valuable. They had a big book with properties in it and most people needed them to buy properties. But now non-licensed buyers have access to everything on the MLS and it won’t be long before we are able to post our properties on the MLS without a Realtor (I’ve heard that this tool may even already exist). They will be like the dinosaurs one day, extinct. :bobble
Depends on what you mean by lowballing. There’s nothing wrong with offering below asking. The problem is when (typically) newbie investors ask newbie agents to make tons of lowball offers on properties on MLS without knowing the value of the property. They usually want to see “what sticks” and will evaluate during the option. Professional agents don’t like to waste time and no good investor will.
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We quickly evaluate the deal and if we like it, we make an offer to purchase at a price that we find acceptable. Sometimes they are seen as “lowballs” in the eyes of the beholder, but they’re good in our eyes. We aren’t just seeing what sticks and offering 30% below any asking price. Most times, if a home is priced high, the seller isn’t motivated. We want to deal with realistic agents and sellers, so call them first to see how motivated they are. Why make an offer if they’re headstrong and not going to budge on price anyway?
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Professional investors get most deals off market by networking, using bird dogs, bandit signs, classified ad advertising, and door knocking. If an investor tells me that his #1 source of deals is MLS, I know they’re new. Investors watch MLS to see what asking prices are and in case a deal actually shows up. We also like to see when MLS homes expire or come back on the market because the seller may be more motivated.
Here is an example in my market.
Just off of this information is this too low of a lowball?
Triplex
$2100 gross monthly rent
$250 monthly taxes
asking 172k.
I would like to offer around 150k.
DeeinAustin,
Good point. I tell my Realtors that I have access to everything on the MLS and that I’m looking for alternative ways to buying properties. This is a point they probably are sick of me saying to them, but it is true. But I have no problem using the MLS or Loopnet and looking at properties with the most potential and then knocking off what is needed off the price.
I still think one of the best ways to sell a property is the MLS. If you have a property at a good or great price the MLS is a great tool. A seller will probably get the best price if they list it on the MLS. But it is just one tool of many.
REI NOOBSTER,
If your property doesn’t have the utilities seperated then you will be running a negative with your bid (no other info is needed if that is true). If the tenants pay their own utilities than here is an estimate.
Gross Rent 2,100 a month
Net Income for a month 1,050 (estimate)
Mortgage pmt (8%) = 1,100
Total profit estimate is $-50 a month
Not much profit at your bid. So you are definitely not bidding to low.
Tenants pay their own utilities. What would you offer and how do you com up with that number? I understand the 70% ARV-repairs=offer rule
and the 1/2 gross rent - P&I rule but what amount of cash flow do you look for at what price? Can you walk me through your though process on this?
Noob,
Mike didn’t mean simply go out and make offers on anything that you see for sale. Just because it’s for sale doesn’t make it a deal, nor even a possible deal. In fact, often times, just because it’s for sale doesn’t mean that the seller really wants to sell. Oh sure, they’ll sell if they get their price. For example, if you happened to throw a lowball offer on one of ol’ contrary Iron’s properties, you’d get a 45 minute lecture on why you’re being so stupid trying to lowball him. Why? Because Iron’s only motivation for selling is getting HIS price.
As Dee said, simply throwing out low offers and hoping something “sticks” is not effective. In fact, since you aren’t determing actual value and working back from there, but only throwing out numbers, getting an offer accepted could be one of the worst things that could happen. Sometimes, you do get what you pay for.
Have you heard of the concept of ‘motivated seller?’ You’ll save alot of time if you work with this type of seller.
Now, to your offer. First, I don’t think that offering just slightly more than 10% off would classify as a lowball offer.
Second, if you understand the 70% rule, then use it. Assuming that $172K is actual value, then your MAX offer would be only $120K.
Now, using Iron’s 8% interest, your payment is about $900/month or $150/month actual positive cashflow. If that’s good for you, then go with it.
Raj
Raj,
Thanks. I am not just making offers on any property. These houses have been listed for 6-24 months so I feel that there may be some motivation in that seller. I am not that busy that making offers on these properties really affects my time. I have my signs out, scour the papers, and call FSOs. In my extra time I can look at the properties and while I am getting to know my market I can make an offer. Once I get to the point where I am getting enough leads I won’t do this anymore.
Can I submit an offer to a realtor representing the seller?
What is the “value” of the house? I would think the seller had the house appraised and they must know that a buyer can not get a mortgage for more than the property is worth. So why would the asking price be more than the actual worth?
REI,
You definitely want to find motivated sellers, that is the most likely way to make these deals happen. Bidding on severly overpriced properties probably want get you too far. But like you said its only your time, and your learning while you do it. I like to find the best 5 or so properties I can find. Then I go through all of them and get the finances. I’ve put 5 bids down at one time but that can be a little overwhelming. So I start with the one I feel has the most potential give 24 hrs for a decision, then move to then next one, then the next one. Sometimes I will low ball, required terms, and maybe a few other odd things. Then counter back with no terms and just a low price, they sometimes bite on that method.
Finding the “actual value” is difficult. You’ll hear the phrase “Art not a science”. The most important thing really is Cash in Vs. Cash out. So you need to cash flow the property and if you have a positive number than its your call on whether to move forward. I only really get concerned with determining the appraised value when I am working with HML. Otherwise you are buying at a discount so the appraisal won’t be a big factor. The seller doesn’t always have a property appraised, it is the buyer that is required to have an appraisal done.
You may want to shot DannytheGreat an email, he is very knowledgeable on teaching how an appraiser assigns a value to a property.
What is the “value” of the house? I would think the seller had the house appraised and they must know that a buyer can not get a mortgage for more than the property is worth. So why would the asking price be more than the actual worth?
If you believe this, then I’d stop making offers on properties until you learn what values are and how to determine them. Think about it for a minute. If every house on the market was priced at it’s actual value, then why would any of them be on the market for longer than average time?
Also, days on the market doesn’t necessarily mean that the seller is motivated to sell. As stated, several properties have sit for years on the market at a certain price. Why? Because the ONLY motivation to the seller was to get that price.
Raj