First Deals, First Offers

6 Replies

Needing some assistance on writing offers. Matt Theriault from Epic Real Estate Investing says to write an offer to everyone. He uses a 3 option close, so, that's what I plan to do. My wholesaler partner says they are not deals and doesn't want anything to do with them. He wholesales only. I want to buy and hold these two and need practice writing offers. 

Here is what I have.

Property #1 is a SFR on the 200 block of Blue Ridge Rd Indianapolis, IN. Seller is not too motivated as he wants full price ($185,000) less discount for not involving a realtor and doesn't want to remain on the loan. Comps in the area are $185-190K. It's his only rental and want to be rid of it. Currently renting for $1450 but market rent is $850 according to I know I can rent for $1000. Owner owes $142,000 and monthly payment is $1275 w/PITI and $842 without. Repairs would be about $8-12K. How do i come up with 3 different offers?

Property #2 is a SFR on the 1200 block of N Holmes Indianapolis, IN. Seller owes $34k and doesn't want any profit. Just wants someone to take it over. Comps are $25,000-$45,000. Probably about $10k of work. Rent in area is $550 and I can rent it for $1000 for student housing because of an organization I work with. Monthly payment is $450 w/PITI. These are my first two deals I'm working on. How would I structure 3 different offers on these properties?

There are probably other questions that need asked and answered so please let me know what I'm missing. 

@David Gunn I understand why your partner doesn't want to have anything to do with them. The Blue Ridge Rd property is not a buy and hold deal. You say that it's rented for $1450 but the market rent is $850 but you can get $1000. Wow. That's quite a range. You need to really nail down what the rent is but even if it is $1450, that's only a .7% rent to price ratio. There's no way this is going to cash flow. The N. Holmes property is in the Haughville area of Indianapolis which is a seedy, rough area that is part of the citie's "weed and seed" program for blighted areas. These 2 areas are very different from each other and very different property classes. In my personal opinion, I think while you're learning, it's better to stick to one class of property in similar areas and get to know everything you can about the area and property class. It makes it much easier to recognize a good investment and reduces your chances of mistake.

I don't know anything about the area but I do want to bring up the rent.

How do you know that $1450 is not market rent?  Is family or someone paying above market for the house or a special circumstance. Personally those rental calculators and estimators are BS and I don't even bother using them. In our area it said we could only get $750 when I got $1500-$1600 easily for the house. 

@David Gunn , between 1: negative cash flow, and 2: the Seller being underwater - no further questions about them need answering. These are not deals!

It's good if you can get $1000/m rent for properties that might normally rent out for less - but Tenants (and/or their providing Organization) still expect value for their $1,000, so you don't really want complaints from the get go.

So, you have provided two extreme examples of lousy deals - now go look for some good ones. Hopefully you will still be game to ask again! Cheers...

@David Gunn , oh, and in regards to: "Matt Theriault from Epic Real Estate Investing says to write an offer to everyone. He uses a 3 option close"; - sure, you could ask these Sellers: "Your price / my terms OR Your terms / my price, with a (proprietary) letter reading:

“Mr. Seller... I’ve completed my research and have put a few different options together for you. Now... I understand that this probably isn’t what you were hoping for, but after my market analysis... this is what the market is allowing me to offer. Maybe the offer could be stronger in the future... and maybe not. Neither of us could possibly know what the future for the market holds, but this is what it is right now.”

BUT, neither of these Sellers are likely candidates for your success. And in 98% of the Offers you might make, the same will apply. It IS a numbers game though. Just make sure that your Offers, when RARELY accepted, WILL be "deals"!

Thank you all for your input. You have supported my and my partners conclusions. I will punt these to a realtor friend and see if he can help them on the retail market.