What percentage of your deals come from the MLS using the 70% rule?

Question

Hi everyone,

I was just wondering how successful investors are finding great deals on the MLS. I've offered several thousand dollars over asking price on properties in the southside suburbs of Chicago. Everyone has been outbidding me so far.

What is your approach when submitting offers for properties listed on the MLS? Do you use the 70 % rule? I feel the market is so competitive and perhaps most people don't follow this rule. It's also possible I'm being very conservative on my repair estimates. Any feedback would be greatly appreciated.

Darrell Shepherd · Answer

I've got lenders that'll do newbies at surprisingly good rates...

It's always been hard to buy right out of MLS.  2011-2012 was a rarity.  It can be done, but you've gotta work it and be in a position to be the one that gets "lucky".  Some markets are at 80-85%.  I'd lose money buying at that, some people have lower money costs and are more efficient, though.

I've bought about 4 in three years from MLS.  All full price offers the day they hit.  I prob made 100+ MLS offers in 2013 and got zero because the hedge funds were over paying for everytbing.  Usually it takes 40-50 offers to get one in my experience.  If I wanted more, I'd look for reasons they should be priced right (repairs or something else I can fix), then make the offer on my numbers no matter what the asking price is, and resubmit it at least every 21 days or so. Follow up is key, I've bought a ton of houses from people who said no and came back later.

Colin Smith · Answer

How about instead of asking in terms of a %, how much do you all aim to net on an average flip?

Colin Smith · Answer

In my market a lot of people are now using 80%-85% to be competitive, otherwise you'll always get outbid.

Account Closed · Answer

@Joe Villeneuve I'm targeting areas with a total project cost of no more than 120K. I just feel there's more variance on higher end properties which could result on greater loses in case things go wrong.  I also have limited capital currently 50K, and I'm thinking most Hard money lenders won't lend to newbies unless we put a decent percentage of the project cost. What are your thoughts on this? @Crystal Smith For a cosmetic repair assuming no mechanicals need to be replaced I normally arrive somewhere between 30-35K depending on the SQ FT. If there's more heavy work involved, I'm around the 50's (updating electrical, plumbing, HVAC, roof etc). For a roof, I estimate between 5-6K, Kitchen between 10-12K, bathrooms about 8K, reflooring (Hardwood floors)between 4-6 dlls/SQ ft including labor. What are your thoughts?

Crystal Smith · Answer

Account Closed:  I think you're too high on kitchens & bath reno numbers.

Crystal Smith · Answer

I won't give away our secret on finding great deals on the MLS but regarding offers, we establish our own margins for deals.  Nothing to do w/ the 70% rule.  Some deals we need large margins, others we're willing to accept smaller margins.  Regarding you repair estimates- What are you estimating for kitchens, baths, roof, windows,.....

Joe Villeneuve · Answer

Account Closed  Why are you in a market that doesn't work?

Derek Walvoord · Answer

I am still seeing deals out there on the MLS.  The really good ones on the south side are going really fast right now.  I am mostly looking in South Shore, but I think the markets are pretty similar all over right now.  Some of our clients at work are actually starting to do the 2 unit to single family conversion in order to make the numbers work on the northside.

Chris Holmes · Answer

There is an old saying.....the easier it is to find a property available to buy, the more you will pay for that property. You've got lots of competition with the MLS. Thus, invariably in many markets, people will overbid on houses and end up with skinny profit if any.

Sure there are markets out there that are still good, but in my market for instance Austin TX, it's very difficult to find a juicy deal.

Try to find other avenues in order tind deals.

Sean McNamara · Answer

MLS has been extremely tight lately. The vast majority of the deals are being listed already above 70% ARV, and even when priced appropriately, the competition will end up bidding above list price.

We used to tie up deals of MLS regularly, now we get the majority of our deals through wholesalers. We are consistently seeing homes sell for 80% ARV or higher.

What percentage of your deals come from the MLS using the 70% rule?

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