First duplex, paying $5,250 more than asking price .. on market

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First duplex, paying $5,250 more than asking price .. on market

Michael Junior
Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
Hey Guys! So as excited as I am about going under contract for my first house hack investment.. I can’t help but think i May have made a mistake. It’s a great duplex in a great location- smack in the middle of Two pronoun college universities, other great schools and in an all around higher income class area. I plan to live in one unit, rent the other as I will be using a FHA at 5% down. Here’s my issue. The property was listed at $350,000- Im payIng $355,250. I spotted it the day it came on market.. turns out so did 10 other guys. I went and viewed the same day it hit the market.. as did the other fellas! Property is nice, physically appealing in the sense that there isn’t any major repairs to be done ( to the naked eye ). Anyways, I asked around.. showed the property to a few contractors I deal with in the area. As well as agents, and lenders. All see it as a great investment. The numbers work, but I can’t help think that I’m doing wrong. Everything I read says to buy right ( like 15-20% below what the market bares ). Is this always the case? Or could I still have struck a fairly good deal even having to over pay a bit. P.s I’m an agent myself.. all the other offers were cash offers. Above asking- I only got the deal because I waived my commissions on it. Just figured I’d throw that out there! But anyways drop me a line.. am I making a mistake?!?!
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y

If it were listed for $1, would you still feel like you over paid because you spent hundreds of thousands over asking? If it was overpriced at $400k and you negotiated down to your current contract price, would you then convince yourself you got a good deal because it was $65k under list?

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  • Greg Miller
    Investor · St. Louis, MO · Member since 2017 · 109 posts · 77 votes
    7y

    Sorry, but that is not always the case.  Good properties get snatched up very fast these days.  My wife is also a real estate agent in St. Louis and the market is pretty strong here, as well.  This is the way I would frame it:  you paid $5,250 extra in your mind.  At 5% down this comes down to $263 more out of your pocket.  This is nothing in the long term.  Think about 2+ years from now when you want to move out, replaced yourself with a solid tenant, and have a strong cash flowing asset. 

    17Reply
  • Bob Okenwa
    Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    If the numbers work at 350k or 355k, then a deal is a deal. Of course a better deal would be 330k, but getting such deals isn't always a reality. In a perfect world, investors would get every property 25% below list or market value, but that is not the case and there are times where you may spend more than you want to get a deal. 

    Secondly, if you're putting 5% down, why not go conventional? If you have the credit, it could be cheaper in the long run than FHA.

    6Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    If it were listed for $1, would you still feel like you over paid because you spent hundreds of thousands over asking? If it was overpriced at $400k and you negotiated down to your current contract price, would you then convince yourself you got a good deal because it was $65k under list?

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    28Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    7y

    Every here at this site wanting to get discounted deals. 70% rule, 1%. Paying $2 /share from Apple stocks, $59 on Amazon. This is human natural behavior.

    Conditions changed if there is competition. This is just cost of doing business. You know that. 


    5Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    My opinion is that if you were in a bidding war you over paid. However since you do not provide any numbers on the rental market it is impossible to gauge. It boils down to your standards. You set your goals regarding required minimum return and maximum purchase price before you make a offer. If you were seeking a 10% CoC return and you achieve that 10% return based on the purchase price you reached your goals.

    2Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    7y

    If the numbers work, you need to shut off all of the noise in your mind. It doesn't matter what other people's offers looked like, what their terms were, etc. If you got a deal that you like the numbers on and it will make you money and help you achieve your personal goals, you are golden. Move in, and go find another one!

    13Reply
  • Wesley C Smith
    Rental Property Investor · Flint, MI · Member since 2018 · 17 posts · 9 votes
    7y

    If the number work call it a deal and don’t beat yourself up. What was the cap rate, cash on cash and cash flow?  I would compare these three figures against any other deal you were considering. It help keep things “apples to apples”. If you are fulfilling your long and short term goals you are winning. 

    1Reply
  • Jorge Garcia
    Cleveland, OH · Member since 2013 · 150 posts · 62 votes
    7y
    @Michael Junior , I started in Cleveland real estate 7 years ago and I overbid everyone if my numbers work, whats bad is to lose out on that deal that works for you! Today I live in Key West managing my properties from my home, did it all in 5 years with hard money and overpaid on most of them, guess what? If I wouldn’t have overpaid then someone else would be enjoying life in Key West. If the numbers work, who cares?
    12Reply
  • Michael Junior
    OP
    Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
    7y
    @Greg Miller appreciate the response. Thanks for putting in that prospective.
    0Reply
  • Michael Junior
    OP
    Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
    7y
    @Greg Miller I hope to be out in a year on the hunt for another already !!
    0Reply
  • Michael Junior
    OP
    Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
    7y
    @Bob Okenwa yeah I guess if the numbers work. And deal is a deal.. And I mean it’s my first investment until now I didn’t know it would be more beneficial to just do a conventional loan. I’ll speak to my lender tomorrow! Thank you
    0Reply
  • Michael Junior
    OP
    Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
    7y
    @Corby Goade thanks man. That’s all I needed !!
    1Reply
  • Michael Junior
    OP
    Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
    7y
    @Jorge Garcia very true I was just like damn all these guys getting deals for 20% lower than market? But if it works it works
    1Reply
  • Jorge Garcia
    Cleveland, OH · Member since 2013 · 150 posts · 62 votes
    7y

    Thats right, if it works for you then its a deal. Good luck bud! 

    0Reply
  • David H.
    Madisonville, LA · Member since 2018 · 125 posts · 71 votes
    7y
    Like has been said if the numbers work it doesnt matter. Asking price is arbitrary right, it's worth what the market dictates and if it meets the numbers then it's a good deal. My guess is if others were offering cash above asking than it's a good deal!! And look at it this way, if you had paid $5k below you might feel better but realistically a $10k difference is like a 2percent difference and is really insignificant in the life of the property. You may not have gotten the absolute best deal but you cant let that get in your head and play mind games. The last two houses I bid on were foreclosures that needed alot of work. I bid a few k above asking on both and won both bids because I knew I was competing with cash and felt that at the price I offered I was still well below what I needed to make the numbers work. I'm still pretty new so I'm not saying this will work perfectly or is smart as I'm not certain yet but I tend to feel when your starting out and are competing with cash (which it seems to me you normally are on good deals) then sometimes we arent in position to get the absolute best deal and just have to make it work. Anyway, second guessing is normal but dont overthink it. And congrats!!
    1Reply
  • John BucciPro Member
    Real Estate Agent · Tarrytown, NY · Member since 2016 · 149 posts · 63 votes
    7y

    Congrats on your first deal. Think about what you gained, not what you're missing out on. 

    Assuming it cash flows and you'll enjoy living in it sounds like a win to me. 

    The next 1, and the next 100 deals you do will be so much easier, and you can take what you learned here and apply it. 

    Be more selective next time if you want, but don't beat yourself up over it.

    [email protected]914-420-8497
    3Reply
  • Derek Luttrell
    Chicago, IL · Member since 2017 · 231 posts · 124 votes
    7y
    Originally posted by @Russell Brazil:

    If it were listed for $1, would you still feel like you over paid because you qent hundreds of thousands over asking? If it was overpriced at $400k and you negotiated down to your current contract price, would you then convince yourself you got a good deal because it was $65k under list?

     What you described here is what I go back and forth with myself on with every offer I make. It's like if a property is listed for $140k, I'd be okay paying $130k; but if it's listed for $130k, suddenly I'm only okay with paying $120k, for the same property. I hate how the asking price sets so much of the tone on what I as a buyer am okay with paying. I'm still looking for a way to overcome this. 

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y
    Originally posted by @Derek Luttrell:
    Originally posted by @Russell Brazil:

    If it were listed for $1, would you still feel like you over paid because you qent hundreds of thousands over asking? If it was overpriced at $400k and you negotiated down to your current contract price, would you then convince yourself you got a good deal because it was $65k under list?

     What you described here is what I go back and forth with myself on with every offer I make. It's like if a property is listed for $140k, I'd be okay paying $130k; but if it's listed for $130k, suddenly I'm only okay with paying $120k, for the same property. I hate how the asking price sets so much of the tone on what I as a buyer am okay with paying. I'm still looking for a way to overcome this. 

     Ignore the listing price altogether, and learn to value the property completely independent of the listing price.

    People who move to the DC area have a hard time buying property here because they dont understand that properties are generally very very under priced. This is a strategy to drive maximum interest. Ive listed properties as much as a quarter million dollars under market in order to get more eyea on the property. Conversely Ive also negotiated up to a quarter million off the list price on an overpriced property.

    I had a client recently who was new to the area who wanted to come in $20k under list on a property. I told him hed need to be $100k over list and he still might not get it. He thought I had no clue. Well we parted ways and it closed right around $100k over list.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    6Reply
  • Richard Sherman
    Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes
    7y

    100% agree with @Russell Brazil   Business is about hitting a lot of singles, doubles etc, it isn't about only striking out OR hitting homers...Hell, hit me with the ball, I would rather walk to 1st then sit in the stands...;)

    Seriously though, one of the TRUE powers of real estate is you take a OK deal or even a less than great/badish deal and add a few years and it becomes a great deal...time is your friend in rental properties.

    7Reply
  • Todd Powell
    Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
    7y
    @Michael Junior in my opinion you made a great deal, if the numbers work. I love my campus close properties. I think you have a touch of buyers remorse which is normal. If you were not a realtor you would have NOT won this bid! So congrats !
    2Reply
  • Derek Luttrell
    Chicago, IL · Member since 2017 · 231 posts · 124 votes
    7y

    @Russell Brazil @Richard Sherman those are good points. On previous deals of mine I remember being like $3-5,000 away from the seller's best and final, and thinking I should walk away. In reality, if the deal works at your number, it probably still works at $3,000 more, and it's a drop in the bucket over a decades long asset that someone else ends up paying for. We're all stubborn in wanting to feel like we came out on top, and it's something I personally need to learn to let go of. 

    2Reply
  • Gretchen P.
    Rental Property Investor · Littleton, CO · Member since 2014 · 150 posts · 114 votes
    7y

    What it is worth is subjective. I've paid over asking to snatch something up (and renovated to get a 9% cap rate from it) and $25K under asking on another property due to a variety of factors. I paid what they were worth to us. It is a good deal if it works for your investment plan. 

    Doing a live-in deal has other considerations than something you would only rent out. 

    0Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    7y

    @Michael Junior, I was in the car for several hours today and listened to the 2 most recent podcasts. In one of them, the guest mentioned an episode in his past where he found a really good deal but second guessed himself. So he spoke to a local investor to get his opinion on the deal. A week later the local investor closed on that deal. He doesn't doubt himself anymore. So far, everything you've said indicates you like the deal. Perhaps you should plug in BP podcasts and enjoy. 

    0Reply
  • Federico Gutierrez
    Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
    7y

    Need to think long term which is what many people overlook. YOU got a property, you can write off $5250 easily within the first year of ownership against taxes. 
    IF you didn't over pay you would have no investment, no tax write offs, no source of income. See the small picture your talking yourself into?

    1Reply
  • Jim D.
    Investor · United States · Member since 2015 · 415 posts · 487 votes
    7y

    List price means nothing. 

    If there were several other cash offers looking to pay about the same as you, then you most certainly are not overpaying. That's what it's worth.

    1Reply
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