What is a good way to determine an offer price on a property? Need adivce, thanks.
@Eddie Wright The basic formula is to figure out what the property is worth based upon recent comps. From that, you back out what you believe the rehab to be and the amount you want to make on the deal. Don't forget to factor in all closing costs and holding costs you will incur also.
Thanks a lot
Here is my suggestion.
1. Do a CMA - see what has been sold in near area for similar house.
2. Find out if there are any active and pending sales that is similar to subject property.
3. Visit the property to find out what kind of fix up you need to adjust the value of the property.
4. Read the market trend for the area. Is it selling fast? slow?
5. See how long property has been on the market.
6. Find out as much as you can about the owner of the property. Are they motivated? Why?
7. Make an offer based on number 1-6.
Hope I didn't miss anything! :)
Thanks for asking the question, @Eddie Wright . I'm struggling with the same topic and I'd like to take it a little further if you don't mind.
I think I've covered the analysis @Jeremy Pakalka and @Jordan Kim bring up for a multifamily property i'm looking at. I have a decent idea about the range I'd be OK offering, but of course I want a good investment deal while not losing out on the property because it's too low. I should also mention this is my first investment property so the offer process is pretty foreign to me.
So my super basic question isn't what should the offer be, but really if I am making an offer that the seller considers too low- is that going to jeopardize the deal if they don't get another offer? Can you generally expect to just make a new offer if it's not accepted? How soon can I make a new offer? & Would it be a good idea to give any backup information to the seller of why I think the property is worth what i'm offering?
When trying to arrive at an offer price for multi family units adjust your offer price to a point that the monthly cash flow meets your requirements and your Cash on Cash Return on Investment, should produce returns that are equal too or better than if it were invested in the stock market. I want cash in cash returns better than 11 %or more per year with a minimum of $125 + per door or pass in the deal.
Make it Happen
@Daniel Godbout You have to run your numbers and stick to them. Never be ashamed of an offer you put out. Someone could come in with a higher offer and you lose out on the deal but if the numbers don't make sense, don't worry about it. Move on to the next one.
It is also very important to track that property after you put an offer in. A wholesaler could submit a higher offer with an option period that can't sell it during that time frame. The property would then come back available and your offer starts to look better. When you place the offer, I would also want to have a conversation with the seller to let them know why I offered at a certain price and a proof of funds to prove I am serious.
@Jeremy Pakalka That's fantastic advice and you hit all the points. Was a much needed nudge. I'll follow-up and let you know how it goes this week. Thanks a ton, sir!
@Daniel Godbout Anytime!
So I made an offer I feel very good about earlier today. Walked through my valuation of the property with my agent who sent over the paperwork and reviewed with the listing agent. Listing agent is going to review with the seller tomorrow and then we'll see where it goes from there!
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