''OFF MARKET'' PROPERTY OFFERING

[Steven Garza]

Hello BP community,

I am looking to purchase my 1st investment property, I am going to try the 90 day challenge. I have a TON of questions as a newbie in all of this which I am finding a lot of answers to using BP. I would like to know, when finding off market deals how do you come up with an offer price? Since the home isn't on the market how does one know the price of it prior to making an offer? Any info would be greatly appreciated.

Thank you.

[James Alderman]

@Steven Garza

Hello Steven, and welcome! The offer price will depend on a number of things, including comparable sales, condition, financials, and risk tolerance.

You can find comparable sales by looking for similar homes in the area that have sold in the last three months. Professional appraisers will use adjustments to account for differences in square footage, bedrooms, age, lot size, etc. 

Condition will take into account any deferred maintenance and upgrades that you'll need to make upon purchase. You should have an estimate of the costs, preferably with the help of an experienced contractor.

By financials, I'm referring to whatever metric(s) is important to you and your business. It'll be different if you are buy and hold vs flipping. For a LTR, I'd be researching the market rent by looking for active rentals, using rentometer.com, asking my realtor, etc. I'd also be looking at expenses which will include the mortgage, insurance, taxes, repairs, capex, vacancy, utilities, lawn/snow, management, etc. Depending on the neighborhood and purchase price, I'll be looking to cashflow anywhere from $150 to $400 per unit. I'll also look for 10%+ ROI after stabilized.

Risk tolerance accounts for things depending on your age, amount of other capital, timeframe, market conditions, and the like. This can be padding numbers conservatively or buying at, say, 75% of what you believe a property is worth. As the market is turning right now, buying below market value is ideal in case values dip over the next year before recovering.

These are only a few things to be at the top of your mind when looking at properties. You'll gain a lot of experience just by looking at properties and practicing "running the numbers." You'll start to get a second-sense after you've analyzed 50-100 properties. Also, there's a lot of great info in the BP books, which I've devoured over the past two years. Let me know if you'd like any recommendations based on your investment goals!