As you begin your real estate investment business, you are interested in learning the most effective ways of making good choices of of buying property in which to invest. You also need to utilize the industry’s’ most effective bidding practices in order to have your offers accepted. Choosing the best investments and closing on their purchase will be the winning combination toward building wealth through your real estate investment business.
One of your biggest challenges will be making good offers on the property you wish to purchase. With lots of potential deals out there, you don’t want to make offers you will later regret. If you overpay you will lose money. If you overlook a good investment, you will also lose money. You also don’t want to pass up on a really good deal. Is there a special formula for making winning offers when investing?
There is no one magic solution to making a successful offer but there is specific knowledge you should have before you can make your most effective one. Let’s examine the steps to take in order to become a knowledgeable and successful real estate investor.
Know Your Real Estate Market
The most important factor in making the best real estate offers is to really know your local market. Know property values, rents, property rehab costs in the property’s specific area, and real estate fees. Knowing this information will ensure you do not offer too much for the property. By the same token, it assures you don’t miss a great property because you didn’t offer enough. Know the area better than your competition and this can give you the winning edge and bid; maybe you know how much you can actually rent it for or you have an excellent local contractor who will accomplish the job for less than your competition’s.
Make the Deal about Them
Although in our minds the real estate deals we’re trying to make are all about us and our needs, this is not the case. Each deal is actually about the seller. Keep that firmly in mind. Figure out what the seller if looking for and as much as possible, make it happen. Connect on as many points as possible.
Put Your Best Foot Forward
In order to make the best impression, you have to know what type of seller you are making the deal with so you can decide how to best meet their needs. IS this seller selling retail or are they a motivated seller, such as an heir to an estate? Is it an expired listing, a foreclosure, or a fixer upper in need of a lit of TLC? Will you be buying directly from the bank? In whatever case, structure your deal to appeal to the needs of the seller. Some specific ways to do this are to:
- Try to close as quickly as possible to save the seller time and money.
- Take advantage of your deposit. Always use preapprovals and proof of funds when possible. Pay an extra deposit after the inspections are completed. Even offer a full price deposit on a cash offer to show how serious you are if necessary.
- Know when inspections are needed and, just as importantly, when they are not. Buy “as is” if you can. If buying from the bank, keep it simple.
- Focus on what really matters. Try not to add extra issues. Try to meet the seller on as many items as possible to lessen points over which to negotiate. Try to only negotiate price if at all possible.
- Remember that terms are sometimes more important than money. It’s not necessarily what you’re paying but how you’re paying it that counts. It also pays to build good rapport with the seller.
- Make the first offer your best. This is especially important if you have competition hanging around.
- Time can work in your favor. Occasionally it is smart to be slow to respond to a counteroffer. Let the seller experience a fear of loss, and often they then come around to your side and accept your next bid.
- Never be an emotional buyer, particularly when buying an owner-occupied property. The seller then has a huge advantage over you.
Now that we’ve talked about what to do let’s discuss some of the things not to do if you want to have your bids accepted as well as to be taken seriously as a real estate investor. One mistake that new investors typically make is sending off a variety of low-ball offers. These offers are often simply based on the property’s asking price. Sometimes they are based on unreliable online comp tools.
One of the problems with these offers is that the senders overlook the fact they are hurting the connections they could be making because they are instead insulting these sellers and real estate agents with ignorant and time consuming offers that are no good. They don’t take you seriously. Later when there is a property you really want, they might not even look at your offer. Always make educated offers that you figure based on the numbers – values in the area, size and condition of the home, and all the pertinent facts. It might still look like a low offer but if it is based on the numbers, then it’s okay because it is an educated offer.
That offer should also take into consideration the amount of work needed on a fixer upper. If the property needs a new roof, plumbing repairs, and other work as indicated by the results of home inspections, the amount of money needed for those improvements has to be considered when bidding on the price of the home. It is always safest to price your bid for the worst case scenario or your will quickly spend all your potential profit in repairs.
Check the Ads and Get Started
Don’t over think your first purchases. Many of your selections can be made from ads and real estate sites online and foreclosure listings. Study the listings and do the math. Run the comps and figure the numbers. Then take a quick look at the houses. Start with homes that require little remodeling or repair, if you are nervous about that aspect. Perhaps properties already fully rented and occupied might be a good place to start, depending on the type of investment you plan to make. After a few successes, you will feel more confident and will begin to develop a reputation with the agents or bankers with whom you work. Then you will be one you way to being a successful real estate investor.