Monthly Rent: $5,100
Asking Price on MLS: $830,000 (originally listed in October 2014 for $800,000)
Price that can work for me: $720,000 (this is a hot part of Los Angeles - definitely no 2%/1% rule here).
Do I go in at $700,000? I feel that that number may be offensive. However, the seller does not know I have seen the listing on MLS/know his asking price on his listing. He just thinks I am responding to his voicemail, which he left in response to my yellow letter, so he may not be so offended.
Logan I had a large thread on a back n' forth with a seller. There were two sides. Some people give their best and highest from the get go. Others start a little low and work up to it. I would honestly just give your max in this instance. 20k isn't a huge difference in correlation to his asking price. How long has it been listed? What does it comp at? Leave your offer open ended he may call you in a few weeks.
Don't worry about being offensive. You can only pay what it makes sense to pay.
Is the house listed, but you marketed to it as a wholesaler and now you want to try and get the property at a lower price?
I can only speak from my personal experiences wholesaling. Generally, if a seller returns my call and their home is already on the market - they are not willing to negotiate down to true wholesale prices. They're talking to you because they think you might be willing to buy it at or near what they have it listed at.
I'm sure there are exceptions, but that's been my experience with trying to wholesale on-market deals.
The other thing is that it would be hard to advise you on price without knowing the address or other specifics of the property necessary to do the analysis and come up with an accurate ARV. There are currently 12 properties on the market for $830K in the LA area based on my quick search.
That said, if you are trying to do a real wholesale deal and you believe the numbers look good (they leave enough equity on the table to give an investor 15-20% min return after cost of repairs), then make the offer. The worse they can say is no. In most cases, wholesalers should feel a little embarrassed by their offer (at least when starting out).
I hope this is helpful!
Thanks for the quick help, @Ryan Dossey . It was helpful. Yes, the fourplex is listed, and I marketed to it as a wholesaler and now want to try and get the property at a lower price. Do you think that because the property has sat on the market for 4 months without being sold that the owner may be more willing to go down in price?
I'm still trying to learn the ropes. Sent out my first yellow letter campaign in an effort to find my first property (looking into doing an owner-occupied fourplex in Northeast LA).
Give him your best offer (even if its $700K). I have explained to sellers that as an investor, I can't (and won't) compete with motivated buyers as my purpose is different so my offer may not be the highest they get. Even if I want the house, I can't blame them for wanting more and I tell them that I hope they get the best deal that's right for them. I'm guessing since the guy responded to a yellow letter despite having the house listed on MLS, there may be some factor that is making him anxious to sell?
You could indicate any advantages that your offer may present (different things are attractive to different sellers for different reasons): that because you already have financing lined up and you can offer a quick closing. You may be willing to take the house as-is without an inspection. If they need to leave stuff that you'll take care of the clean out (e.g. in a decease estate situation), etc. If they're facing financial difficulties, you could offer a 6 month lease at slightly below market rent to give them time to get alternate housing. This is just off the top of my head, try and get a sense of what may be important to them.
Then say your offer is firm for 2 weeks (or whatever you're comfortable with), after which it can be considered a standing offer that may be dependant on other offers/properties that may come along. I do think that on paper an offer should have an end date. You don't want someone coming back 6 months later insisting that you honor your offer when you've moved onto another deal and your capital is tied up.
You're looking into my neighborhood... Currently there's only one property I see here that is a "good deal" so I'm not sure what you're looking at exactly...You gotta pull the comps and present the owner with a fair offer based on these comps (include the comps with the offer). Since the property is on MLS, the owner's agent priced it based on comps so you need a black on white proof why your offer is lower. If it is a 4-unit and in decent shape it will sell in high 700s.
I love working with strangers because I don't have to worry about "hurting" there feelings! So offer what you need to make the deal and don't worry about anything else.
WQW, I am dealing with a slightly destressed 4 unit in SW MI...sale price $10,000.
In CA you can get $700k.....what a difference,,,ths one will gross $2100 monthly.
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