Making An Offer

4 Replies

Hey everyone, I purchased my first property in 2013. I'm about to purchase my second one. Understandably--crunching numbers, knowing your market and the overall purpose of the purchase are some of the key elements involved when creating an offer. I wanted some feedback on what you personally do when you find a property that you really want. What is your process? What has worked for you? I appreciate your response:)

@Michelle Nelson

It's pretty simple, and you outlined it already, just making sure the numbers work for you. If you have a goal of $100 cash flow per door for example, you run the numbers and make the offer that makes it work. Hopefully it's at some discount so that you are able to go into the deal with some equity already there.

Good luck with the 2nd property!

This is an interesting question for me and one that I'm trying to find a balance between what I relied on soley in the past, and what I've learned from BP experienced number crunchers and experts. 

Prior to joining BP I did my purchases based on comps, looking at the neighborhood, and looking at (without all the deep analysis) what I could get for rent that would cover the expenses and mortgage, etc but again without the deep analysis.

Today, I've included the analysis as my 1st start so that I can better see the $$$ as it relates to the rent, everything that I have to pay (mort, taxes, ins, pm, accounting for future things like cap ex, minor repairs, turnover, etc), and returns.

What I've found between these two methods is that the analysis has surely uncovered a view into every $$$ related to the property. It's actually a relief to be able run the numbers and have everything update to give me the COC and ROI.

And like @Michelle Nelson I'm torn with the "offer"....for the property.

As I mentioned, prior to this I went with comps and a "little" analysis on what I viewed as being able to pocket $$$. I should also say I am a buy and hold.

 A lot of people say that if the "numbers" don't work, ie getting that certain cash flow every month, then they move on. I don't know if that means they don't "offer" what the offer price is based on their numbers, or they do give that offer and the seller rejects it.

@Josh Mitchell what portion of comps do you rely on when you crunch your numbers?

I've found a property that according to my required net, will cash flow nicely but at a $20k less of the list price.

I generally put in the list price first to see what falls out and then start deducting until I get to what I want in returns. There are several properties that don't cash flow well with the list price or the reduced pricing that I do.

As I become more versed with this I expect that this process will get easier as I've already streamlined my spreadsheets to give me the bottom line numbers.

Thanks all!

When investors say "if the numbers work" they are meaning you should have a maximum offer price for your numbers to work. If the asking price is more than your maximum offering price then you offer whatever it is to make your numbers work. If they seller doesn't accept then you should move on to the next property. Obviously, everyone wants to make money so offer lower than your maximum as a starting point.

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