{"id":60875,"date":"2014-08-19T07:17:57","date_gmt":"2014-08-19T13:17:57","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=60875"},"modified":"2021-03-16T10:22:44","modified_gmt":"2021-03-16T16:22:44","slug":"2014-08-19-make-offers-walk-away-feeling-happy-unashamed-real-estate","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2014-08-19-make-offers-walk-away-feeling-happy-unashamed-real-estate","title":{"rendered":"The Importance of Knowing Your Numbers in Real Estate"},"content":{"rendered":"

I have been noticing a theme on several of the forums lately.<\/p>\n

Some real estate investors are worried about \u201coffending the seller\u201d with their low offer.\u00a0 \u00a0What?\u00a0 There is only one thing we should be doing and that is making solid offers based on the numbers.<\/p>\n

There is a saying that goes something like this; \u201cIf you don\u2019t feel at least a little bit uncomfortable about your offer, you\u2019ve just offered too much\u201d.<\/p><\/blockquote>\n

In general, I have found this to be true.<\/p>\n

Many real estate investors especially folks that are new get a little \u201csquirmy\u201d when they reach the actual number they should be offering on a property.\u00a0 \u00a0They will then go back and look at the numbers to see if they can raise that offer a little bit to a number that they think the seller will like a little bit better and doesn\u2019t make them squirm when they say it out loud. \u00a0Getting this new number often involves what I like to call \u201ceraser math\u201d.<\/p>\n

Eraser Math<\/h2>\n

Eraser math is when you start erasing the numbers that should<\/strong> be on the paper and putting down numbers that ease the \u201csquirmy factor\u201d in your offer.\u00a0 I am here to tell you that is almost always a mistake.<\/p>\n

Related:<\/strong> Your Ultimate Game Plan \u2014 Can It Be Tweaked?<\/a><\/em><\/p>\n

When you are putting together an offer on a property there is only one thing that should be happening; you have to let the numbers do the talking. It\u2019s always about the numbers.<\/p>\n

Making solid offers is not about falling in love with a property, or trying to find a way to \u201cmake it work\u201d.\u00a0 Now I am not talking about normal negotiation. What I mean is that you should have an absolute MAO or maximum allowable offer.\u00a0 If you have to start fudging the numbers; raising the anticipated ARV or lowering the repair estimates to make the numbers work that is eraser math, and it is always a bad idea.<\/p>\n

Know Your Numbers<\/h2>\n

Investors all have a little different way or method of doing this, so I\u2019m not really going to go into this part of the equation.\u00a0 The thing you need to know is that you must get really good at nailing your numbers.\u00a0 You need to be completely accurate and this takes a little practice.<\/p>\n

Related:<\/strong> What Is Your End Goal in the Real Estate Game?<\/a><\/em><\/p>\n

I am a wholesaler and my investor buyers are almost always rehabbers or landlords.\u00a0 If I have a house to sell to a rehabber, I have to know what he will need to spend on repairs before I can ever make an offer.\u00a0 The folks on my cash buyer\u2019s list always do their own rehab estimates.\u00a0 But I have to know what those costs will be too.<\/p>\n

This is also true for the landlord buyers on my list.\u00a0 They may not update the kitchen today or put that roof on today that will be needed in the next 12 months, but the bill will eventually come due. \u00a0The numbers for my offer are generally the same for both rehabbers and landlord buyers especially since I\u2019m not always sure who that buyer will be.<\/p>\n

If you are presenting deals to other investors and you don\u2019t have your numbers right, your credibility will go right out the window.\u00a0 This skillset is a must in our business.<\/p>\n

Here Are Some Important Numbers<\/h2>\n
    \n
  • What is a realistic ARV for this property?<\/strong>\u00a0 Don\u2019t look at that oddball high comp.\u00a0 Look at what most properties are selling for, and only compare like properties within a half mile range of your property.<\/li>\n<\/ul>\n
      \n
    • What will the repairs likely be?<\/strong> Get your number and then add a little more. Things always take longer and cost more than you expect.\u00a0 This brings up another point; learn to expect the unexpected especially for rehabbers.\u00a0 Ask yourself, \u201cWhat else can come up\u201d?\u00a0 The older the property, generally there will more of the \u201cunexpected\u201d that will show up.<\/li>\n<\/ul>\n
        \n
      • Know the market conditions in your area.<\/strong>\u00a0 If you are a rehabber or a wholesaler selling to a rehabber, look at the days on the market for properties like yours in that area.\u00a0 If the days on the market are longer, folks will be looking for a little larger spread to cover holding costs.\u00a0 This won\u2019t necessarily be true if it is a seller\u2019s market where there is a low inventory and properties are moving quickly.<\/li>\n<\/ul>\n

        Final Thoughts<\/h2>\n

        Real estate investing is no different than any other business; knowledge is power.\u00a0\u00a0 Your knowledge is also what will give you credibility with other investors. \u00a0Spend whatever time it takes to make you an expert in what you do, and it will pay big dividends down the road.<\/p>\n","protected":false},"excerpt":{"rendered":"

        I have been noticing a theme on several of the forums lately. Some real estate investors are worried about \u201coffending the seller\u201d with their low offer.\u00a0 \u00a0What?\u00a0 There is only […]<\/p>\n","protected":false},"author":661,"featured_media":60891,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-60875","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/60875","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/661"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=60875"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/60875\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/60891"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=60875"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=60875"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=60875"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}