Trying to compete with cash buyers

Clarksville, TN · Member since 2018 · 24 posts · 7 votes

I keep finding incredible properties and have been preapproved for a fix and flip type loan (with 20% down) but can’t get any offers accepted! My realtor (who works with other investors in my area as well) told me that though I shouldn’t give up, it’s extremely difficult to get an offer accepted on a great flip property because the other investors around here are cash buyers. Any advice?? I asked my realtor about the idea of trying to partner up with another investor who’s a cash buyer and I could provide the renovation money. She said that too could be a challenge because of the competitive market here. Am I fooling myself to think others would want to work cooperatively versus competitively?

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes

If you are using financing, you need to have something better to offer to the seller who is looking at a cash offer. A grand or two wouldn't sway me in your favor if the other guy had a healthy bank account and his checkbook ready. I've beat several financing offers before because I've done cash. Two approaches, other than finding some other people in which you can join forces to come up with cash, is to either offer substantially more than the cash offer, or operate in zones that filter out most of the cash buyers. If you are looking at the tail end of markets, that's where you're going to be competing with cash buyers.

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Michael Pearse
Rental Property Investor · Kansas City, MO · Member since 2016 · 112 posts · 75 votes
8y
@Traci Cameron Partnering with another investor is a great way to get started. My first deal was with another investor as well. I paid closing costs and he covered rehab costs. We both completed the entire flip process together and walked away with great returns and learned a lot. Definitely recommend working with someone else. Best of luck
7 Reply
Traci Cameron
OP
Clarksville, TN · Member since 2018 · 24 posts · 7 votes
8y
@Michael Pearse thanks! How did you find an investor to work with? Personally known?
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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Traci Cameron the other option is to find off market deals. If you network well, you can just find properties that are a good deal and not have to compete with others
4 Reply
Roshan K.Pro Member
Oklahoma City, OK · Member since 2017 · 258 posts · 215 votes
8y
Originally posted by @Traci Cameron:
I keep finding incredible properties and have been preapproved for a fix and flip type loan (with 20% down) but can’t get any offers accepted! My realtor (who works with other investors in my area as well) told me that though I shouldn’t give up, it’s extremely difficult to get an offer accepted on a great flip property because the other investors around here are cash buyers. Any advice?? I asked my realtor about the idea of trying to partner up with another investor who’s a cash buyer and I could provide the renovation money. She said that too could be a challenge because of the competitive market here. Am I fooling myself to think others would want to work cooperatively versus competitively?
Keep trying! And be the first one to send an offer. Have alerts set up on Zillow, MLS for places that you are looking for.
Think of it as a giant funnel. Assuming you view 3 listings a day:
MLS or other source for deals = 90/month
Actual properties that you will offer on = 50/month
Offers accepted = 1-3/month
Contracts that will go to closing = 0-1/month
So until you offer on 50 properties a month, you can't really expect to get one to stick. It's a giant funnel and numbers game
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Traci Cameron
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Clarksville, TN · Member since 2018 · 24 posts · 7 votes
8y
Roshan K. That’s a great way to look at it! I’m still working full time but I do have alerts set up. My realtor calls me when anything pops up. But I will keep at! I certainly can’t say I’m making that many offers per month. The right one will come along.
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Roshan K.Pro Member
Oklahoma City, OK · Member since 2017 · 258 posts · 215 votes
8y
Originally posted by @Traci Cameron:
Roshan K. That’s a great way to look at it! I’m still working full time but I do have alerts set up. My realtor calls me when anything pops up. But I will keep at! I certainly can’t say I’m making that many offers per month. The right one will come along.
I love my realtor, but don't depend on them. I offer on properties I find as well as ones that she brings to the table.
If you're getting discouraged by no results, you need to be sending out more offers :) And you're absolutely correct, the right one will come along!
Also keep in mind, that the reason you're making 50 offers for one of them to stick is because you're offering them at the numbers that work. IE I've offered on a 475K house at 250K... because that's where the numbers work. Of course, the offer was denied (actually not even responded to), but that's how you have to do it. Stick to your numbers and offer what you can.
On the other hand, I offered 10k over list price because that's what the numbers supported and I wanted to get the contract. I lost out on that one too though, so no guarantees.
Just make your offers and you'll eventually get one!
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
8y
If you are using financing, you need to have something better to offer to the seller who is looking at a cash offer. A grand or two wouldn't sway me in your favor if the other guy had a healthy bank account and his checkbook ready. I've beat several financing offers before because I've done cash. Two approaches, other than finding some other people in which you can join forces to come up with cash, is to either offer substantially more than the cash offer, or operate in zones that filter out most of the cash buyers. If you are looking at the tail end of markets, that's where you're going to be competing with cash buyers.
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Traci Cameron
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Clarksville, TN · Member since 2018 · 24 posts · 7 votes
8y
@Roshan K. and @JD Martin, great suggestions that I’ll use! Thanks for the great advice!
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Eric NeithPro Member
Real Estate Agent · Hellertown, PA · Member since 2016 · 35 posts · 14 votes
8y
@Traci Cameron, Are there any wholesalers in your area? See if they have any properties that they are having trouble unloading. Explain to them up front your situation with using a loan, but you have skin in the game with a 20% down payment. Reach out to probate attorneys in your area and see if you can get a jump on any estates that they are settling.
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Traci Cameron
OP
Clarksville, TN · Member since 2018 · 24 posts · 7 votes
8y
@Eric Neith I’m not sure if there’s wholesalers but I’ll definitely look into that! And probate attorney? Never considered that! How would I approach them (meaning what do I say/ask when I call them?
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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
@Traci Cameron
I operate near the end of what @JD Martin has called here "the tail of markets" in my local area. We buy distressed properties that need significant renovation to make them habitable and fix them to rent them out.
In my niche, there is nothing that beats an all-cash offer with no contingencies. Absolutely nothing. We have made our last two offers through an agent who is very well embedded in our target area -- he knows everyone and everyone knows him. I write an earnest-money check, he takes that check over to the seller (these people have not had a seller's agent) and an offer to close as soon as title clears, and then our agent says the magic words: "I know these people. They are professional buyers. They do not back out of a sale."
Both offers, both significantly below market value, have been immediately accepted.
If I could be guaranteed a clean title with no clouds or liens, I would most certainly go to my sellers' homes to make my offer, stack banded bricks of hundreds in front of their families, and present the contract of sale for their signatures on top of the bricks. That's how obvious an advantage making all-cash offers contingent on nothing is for us.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
8y
Originally posted by @Jim K.:

@Traci Cameron
I operate near the end of what @JD Martin has called here "the tail of markets" in my local area. We buy distressed properties that need significant renovation to make them habitable and fix them to rent them out.
In my niche, there is nothing that beats an all-cash offer with no contingencies. Absolutely nothing. We have made our last two offers through an agent who is very well embedded in our target area -- he knows everyone and everyone knows him. I write an earnest-money check, he takes that check over to the seller (these people have not had a seller's agent) and an offer to close as soon as title clears, and then our agent says the magic words: "I know these people. They are professional buyers. They do not back out of a sale."
Both offers, both significantly below market value, have been immediately accepted.
If I could be guaranteed a clean title with no clouds or liens, I would most certainly go to my sellers' homes to make my offer, stack banded bricks of hundreds in front of their families, and present the contract of sale for their signatures on top of the bricks. That's how obvious an advantage making all-cash offers contingent on nothing is for us.
LOL. I have the same experience as you, and I would do the same thing (stack of benjamins) if not for the title process. My favorite deal is the cash offer to an estate with multiple heirs. The difference between $50k and $60k for one seller is significant; when that's getting divided up 5 ways, it's the difference between having $10k now and hoping to get $12k later. Guess which one most people take?
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Eric NeithPro Member
Real Estate Agent · Hellertown, PA · Member since 2016 · 35 posts · 14 votes
8y
There has to be wholesalers in your area. You probably can find some right on BP, check craigslist for listings with wholesale(r) as a keyword or in the title. Ask other investors where they are buying their properties from or if they might have one in their inventory that they want to unload for a few grand more than they paid.
I would tell they attorney what your looking for, something that is just outdated or up to a property that needs full rehab. You know your limit. Tell them you are preapproved and can close in 30-45 days, maybe quicker. That is something your lender can tell you. You know your capabilities. Take your inspector through on your first walk through. See if they can do a decent inspection in a shorter time frame. They might give you a report that makes you comfortable waiving your inspection to make you offer a bit stronger. Be creative and always do your due diligence.
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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
@JD Martin
That was our last deal, multiple heirs splitting a pittance of cash immediately and heading for the casinos to honor Grandpa's memory.
2 Reply
Kevin Sobilo
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
8y
Can you work at a higher price point... In my area there are many cash sales below $50k, but much less over. So, maybe if you operate on a more expensive deal you will have a more fair playing field to get a deal.
Also, are you offering a clean deal with no inspections? Many cash deals have no inspections.
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
@Traci Cameron typically the type of property that is ideal for flipping is a distressed property. They ave often vacant and the seller is desperate to unload the property. Your offer will need to be way higher and even then, they may still just take the best cash offer. If you keep making offers, eventually you will find a deal where the cash buyers didn't show up or bid way too low. It may take lots of offers. A couple other ideas:
- No inspection clause, many distressed properties are sold as-is so this may be standard.
- Large earnest money / deposit, put $5000 or more down as earnest money so the seller knows if the deal falls through that you have skin in the game
Keep in mind that most cash buyers simply have access to a line of credit, like a HELOC or business loan. They may pay with cash, but it comes from a draw against their line of credit. If you are in a position to get a line of credit, that is a good option too.
5 Reply
Nicole A.Pro Member
Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
8y
Sometimes, even a cash buyer can have trouble putting in the winning offer when the market is hot enough. In Baltimore County for example, cash buyers are just waiting to pounce as soon as a property comes on the market, and many times, they are willing to pay more cash than I am.

Keep trying. You will land one eventually!
2 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
Please don't underestimate the importance of the face making the offer. Crazy as it seems, sellers in emotional distress and denial over whizzing away their parent's legacy would much rather whiz it away to a local agent who is deeply embedded in their community, who works the soft-serve at church festivals and reads off the bingo numbers at the VFW hall and brings some of his homemade kielbasi to the volunteer firemen's BBQ benefit.
Do not discount your local agents who have been eating rubber chicken to pass the card at Rotary events for the last twenty years. Most especially, if that agent knew dear Grandpa Harry and ever shared a beer with him on his porch, the seller feels he's selling out to one of Grandpa Harry's old friends, not just a starred name in that agent's Rolodex.
Make a good offer, by all means, but the face that presents the offer becomes ever more important the more emotional and distressing the decision to sell the house becomes. It's not a tech thing or a generational thing. Human beings are just wires that way.
5 Reply
Tim Youse
Rental Property Investor · Baltimore, MD · Member since 2016 · 153 posts · 158 votes
8y
Cash buyer in Baltimore City here and still having trouble getting offers accepted even offering over list. All MLS properties I make offers on (and ones I don't) I keep track of them to see how far off my offers were. In some cases I was only off my a couple grand- in others I've been outbid by as much as $30k. How are you calculating your Maximum Allowable Offers?
Don't give up. Keep making offers. If all our offers are getting accepted, you're offering too much.
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Traci Cameron
OP
Clarksville, TN · Member since 2018 · 24 posts · 7 votes
8y
@Tim Youse, I've been running my deals through the flip calculator here on BP. That being said, I"m still learning how to get the accuracy of those numbers. I get really hung up on holding costs/selling costs because no one has been able to give me realistic data. I've essentially been using 4% closing costs on the purchase price and 10% on the seller closing cost side. I'm getting better with the renovation costs to an extent. Some things I truly have no idea (like subfloor issues) because contractor can't tell me how much I'm looking at until they've actually checked it out and know what the problem is. Most recently I came across a great deal (though I didn't win the contract) that had a subfloor/foundation issue that could have been a $2000 repair or a $20k repair. That's a pretty big swing.
Keeping track of my offers is a great idea. Haven't been doing that so far.
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Traci Cameron
OP
Clarksville, TN · Member since 2018 · 24 posts · 7 votes
8y
@Jim
@Jim K.undefined
I like the your concept you described but honestly, I don't know how my realtor's face to face connections are. She's relatively new (about a year as an agent) but is a go-getter like myself. Other agents don't seem to have time for a newbie. But I spend as much time as I can networking and talking about my goals.
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Traci Cameron
OP
Clarksville, TN · Member since 2018 · 24 posts · 7 votes
8y
@Joe Splitrock I am using a HELOC as well for my down payment. I was pleasantly surprised at how much buying power the bank was willing to preapprove me for. $5000 in earnest money is possible but takes weeks to get back if offer is not accepted and I'm not a fan of tying up my cash for a maybe. I'd definitely be willing to up my earnest money on an accepted offer though.
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Michael Pearse
Rental Property Investor · Kansas City, MO · Member since 2016 · 112 posts · 75 votes
8y
@Traci Cameron I met another investor from a local real estate social. When I introduced myself, I would inform others my goals and how I was looking for a partner to work on a deal together. After a couple of meetings I met someone who was interested. He was more experienced than I was, so he taught me key things to look for in an investment property, which came really handy for the next deals. You can find investment socials on BP and search in your local area, and through meetup.com (search real estate in your area).
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Account Closed
Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
8y
Originally posted by @Traci Cameron:

Roshan K. That’s a great way to look at it! I’m still working full time but I do have alerts set up. My realtor calls me when anything pops up. But I will keep at! I certainly can’t say I’m making that many offers per month. The right one will come along.
Your realtor is costing you money by only showing you listings. If they were serious, they would find "off market" properties for you.
2 Reply
Chris Purcell
Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
8y
Originally posted by @Caleb Heimsoth:

Traci Cameron the other option is to find off market deals. If you network well, you can just find properties that are a good deal and not have to compete with others
If you're talking about wholesalers, those properties go quicker than MLS deals
My advice would be the only one directly in contact with the seller. Then you have no competition
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